In my experience the issue is
not the debit card. I have a paypal account which is mapped to my bank account via my debit card. It used to work just fine. Then Paypal asked for the PAN number which I provided. The bottle neck is getting the PAN number validated from Indian Income Tax Dept/RBI. Until that is fixed, my Paypal account remains limited. I have had multiple correspondence (like a dozen) in the past with paypal regarding this. After this last reply, I have given up.
I understand your frustration, since the PAN validation has been in progress for quite awhile.
Given this, I have included your account to our high priority list.
Before, the PayPal system has allowed entry of PANs to Indian PayPal accounts without passing through any authentication flow or validation process.
We are now required by the RBI to validate this information through a third party entity or bank.
Allow me to inform that, due to an unexpected increase in the number of Indian PayPal accounts that have to undergo PAN validation, the estimated timeframe of 24 to 72 hours no longer applies. For this I sincerely regret the inconvenience caused to you.
We have been actively raising these concerns to the proper channels and we have yet to receive their response. Nonetheless, rest assured: as soon as we are able to validate your PAN, the limitations on your account will be lifted and we will notify you immediately.
This is dated 1 Dec 2011 and no peep out of Paypal after that. I am not holding my breath. I just took my business to google checkout.