RBI Warns Public Against Multi-level Marketing Schemes

Published: 02nd January 2015 09:27 AM  |   Last Updated: 02nd January 2015 09:27 AM   |  A+A-


CHENNAI: Cautioning the public against multi-level marketing (MLM) activities, the Reserve Bank of India (RBI) Thursday said income under such schemes mainly comes from enrolling new members at high subscription.

The central bank also urged people not to fall prey to the promise of high returns offered by unscrupulous entities operating MLM/pyramid/chain marketing schemes.

The RBI has also said that acceptance of money under money circulation/MLM/pyramid structures is a cognizable offence under the Prize Chit and Money Circulation (Banning) Act 1978.

In a statement, it said that MLM/chain marketing/pyramid structure schemes promise easy or quick money upon enrolment of members.

"Income under such schemes majorly comes from enrolling more and more members from whom hefty subscription fees are taken rather than from the sale of products they offer," the RBI said, adding the schemes make it incumbent upon all members to enroll more members, as a portion of the subscription amounts so collected is distributed among the members at the top of the pyramid.

"Any break in the chain leads to the collapse of the pyramid, and the members lower down in the pyramid are the ones that are affected the most," it said.

The RBI reiterated that falling prey to such offers can result in direct financial losses and people, in their own interest, should refrain from responding to such offers in any manner.

Members of public coming across such offers should immediately lodge a complaint with the state police, it said.

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp