RBI warns against pyramid schemes

MUMBAI: The Reserve Bank of India (RBI) on Thursday cautioned investors against multi-level marketing firms that promise high returns and run on hefty member susbscription fees, warning such offers could result in direct financial losses.
“MLM/chain marketing/pyramid structure schemes promise easy or quick money upon enrolment of members. The Reserve Bank has advised that members of public should not to be tempted by promises of high returns offered by entities running multi-level marketing/chain marketing/pyramid structure schemes,” it said in a statement.
There has been a spurt in the number of such schemes in recent past even as various regulators are taking actions such entities.
Advising caution, the RBI said investors should not fall prey to such unscrupulous entities as the pyramid structure mandates all members to enroll more members.
“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 added.
It said 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.
Further, RBI 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,” it added. Agencies