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RBI cautions public against Multi Level Marketing schemes activities for MLM firms or Companies

RBI recently issued a press release cautioning the public against multilevel marketing agencies that promise quick profits.
 
RBI cautions Public against Multi Level Marketing Activities 
These schemes offered by the MLM agencies focus on enrollment of new members and the commissions taken from these members.
 
In these schemes it is compulsory for members to enroll new members and in response to the new enrollments, members get a portion of the registration fee. Most MLM companies rely on commission collected in the form of registration fee, from enrollment of new members rather than on the sale of products.
 
The money collected from enrollment of new members is also distributed in the members part of the pyramid. When members fail to enroll new members this produces a break in the chain and the pyramid collapses.
Members suffer heavy investment loss when a pyramid collapses. The losses are even more for the members lower on the pyramid.
 
Reserve bank has advised public not to get tempted by the MLM entities offering high returns in response for enrolling new members. These temptations result in heavy investment loss and people should act wisely and not accept any tricky schemes offering quick money very easily.
 
RBI cautions Public against Multi Level Marketing Activities 
A mention of the Chit fund and Money circulation act of 1978 was also made in the release, which affirms that the acceptance of money under such schemes is illegal and a cognizable offense.
 
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