Mumbai: The Reserve Bank of India (RBI) has cautioned the general public against multi level marketing (MLM) activities so that investors do not fall prey to unscrupulous entities. The Reserve Bank has advised individuals not to get tempted by promises of high returns offered by entities running MLM, chain marketing and pyramid structure schemes.
Explaining the functioning of these entities, the Reserve Bank said that MLM or pyramid schemes promise easy or quick money upon enrollment of members. “Income under such schemes mainly 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,”
RBI said and added that 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 further added that MLM schemes can result in financial losses and individuals should refrain from responding.
