Because RBI's policies have given them another way to make some extra money.
I'm in Canada and my PayPal is USD because i use ebay a lot. My attempt to set up a "US Funds" account for Paypal at TD Canada Trust met with them converting money from a Canadian buyer to US then to CAD just in time for TD to convert it to US to go into the account.
Clearly, I halted that after a day.
PayPal insists that it's impossible to transfer money in any currency except the one related to the address of the bank's head office.
http://bradt.ca/blog/transfer-from-paypal-to-a-us-dollar-acc...