Sometime in November 2007, PayPal added a new feature : Widthdraw funds to an Indian bank account. Theres a fee of Rs 50 for withdrawals less than Rs 7,000 , otherwise there is no fee. You'll need to provide the IFSC (Indian Financial System Code) number of your bank though to get this working.
I've created a small form here to search for IFSC codes from 3 separate sources.
Reason for 3 databases is that there isnt any official source that has all the banks' IFSC data - so its better off to compare all sources and check if they match. I'll add more database(s) if I find a different source. The most reliable source is, the bank-branch itself - obviously.
Disclaimer: None of the information is guaranteed to be 100% accurate.