This was a question I posted in November last year. And now I have the answer as well: "You can, as an Indian, verify your PayPal account using your VISA Debit Card from a Bank that has the facility of generating Virtual Credit Cards (like HDFC bank's NetSafe Cards) for online shopping.
The procedure is like this:
1. Generate a new Virtual Credit Card (INR 100 would do).
2. Enter the Credit Card details in the "Add a Credit Card" option of your PayPal account.
3. Login to your Virtual Credit Card service (like Netsafe Login for HDFC users).
4. Check for Transaction (Txn) Details tab.
5. The card you added to your PayPal account will show the details something like PAYPAL*EXPUSE1234, where 1234 denote the 4-digit number you have to enter in your PayPal account (called the Expanded Use number).
Once you have done all this, your payPal account will be verified and you shall be allowed to send and receive limitless amounts using PayPal.
PayPal is NICE!
:) Bestofkashmir