RBI cautions against multi-level marketing activities

Admin   |   03 February, 2015   |   661   |   3980

Mumbai, Feb 3 (KNN) Reserve Bank of India has cautioned the public against Multi-level Marketing (MLM) activities so that investors do not fall prey to unscrupulous entities.

Citing that that MLM/Chain Marketing/Pyramid Structure schemes promise easy or quick money upon enrolment of members, RBI said that 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.

It is 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 bank reiterated that falling prey to such offers can result in direct financial losses and they, in their own interest, should refrain from responding to such offers in any manner.