The Reserve Bank of
India (RBI) on recently cautioned the public against multi-level marketing
(MLM) activities so that investors do not fall prey to unscrupulous entities.
Explaining the modus
operandi of these entities, the RBI stated that MLM / or Chain Marketing / or
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 fee is taken rather than from the sale of products they offer.
These schemes require
all members to enroll more members, as a portion of the subscription amount 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.
The RBI has advised
that members of public should not be tempted by promises of high returns
offered by entities running Multi-level Marketing / Chain Marketing / Pyramid
Structure Schemes.
It 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.
The RBI also said
that acceptance of money under Money Circulation / Multi-level Marketing /
Pyramid structures is a cognizable offence under the Prize Chit and Money
Circulation (Banning) Act 1978. Members of public coming across such offers
should immediately lodge a complaint with the State Police.'
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