Govt for ban on pyramid schemes!! Check list of money raising schemes

Now finance ministry for ban all pyramid marketing schemes.These schemes are looting public money and shut down the companies.

After arrest of Amway India ceo in the case 1978 money circulation banning act finance ministry want to make amendment in money circulation banning act.However, it is not yet clear whether pyramid structures would include multilevel marketing firms like Amway, too.

According to people in the know, following inter-ministerial meetings over plugging the loopholes in the current legal structure that governs multi-level marketing schemes, Ponzi schemes and pyramid marketing, the department, under the finance ministry, has proposed that pyramid marketing schemes be banned and necessary changes in the existing Act be accordingly made.

The proposal, which has been sent to various central ministries and all state governments, says the words ‘Pyramid Marketing Schemes’ and ‘For Matters Connected Therewith’ should be added in the very title of the Act.

The confusion over whether multi-level marketing firms are included in the pyramid marketing structures has arisen because the background to the proposal says: “in view of such ambiguities in existing law, it is felt that there is a need to amend the provisions of the Act to extend the same to pyramid or multi-level marketing schemes”.

However, the proposal’s background note refutes this argument. It says pyramid marketing or Ponzi schemes are justified on the ground that these are for selling goods and not for money circulation and hence the provisions of the Act do not apply to such marketing schemes.

There might not be a clarity on whether or not multi-level marketing firms would be included in the definition of pyramid marketing but it is clear they, too, would face tougher regulations.

In fact, the department of consumer affairs was asked to frame the definition of multi-level marketing companies after the department of financial services came up with the proposal.

However, the department had said that fresh look at definitions was unwarranted when the law was being amended, according to officials.



Prize chit funds Each member subscribes to a certain sum of money by way of periodical installments over a period.

Each subscriber, in his turn, as determined by various ways, is entitled to the prize amount

Banned by the Prize Chits and Money Circulation Schemes (Banning) Act, 1978


Promises to give commissions not only in the event of personal efforts of recruiting members for the scheme but also on the contingency relative to enrollment of new members

Banned by the Prize Chits and Money Circulation Schemes (Banning) Act, 1978


Pays returns to investors from its own money or that paid by subsequent investors, rather than from profit earned by the firm running the operation.

The scheme usually lures new investors by offering fancy returns.

Banned by the Prize Chits and Money Circulation Schemes (Banning) Act, 1978


Offer payments to participants primarily to recruit other people for the scheme; there is no real investment or sale of products.

Banned by the Prize Chits and Money Circulation Schemes (Banning) Act, 1978


Companies collect deposits from the public

daily/weekly/monthly/yearly in the name of realstates/goat farming/plantations through agents

Banned by Sebi


A way of investing alongside other investors to benefit from the advantages of working as part of a group

Sebi approval needed to launch such schemes


Companies can collect deposits from the public like banks and follow the rbi interest rules.

SEBI/RBI approval needED to launch NBFC Plans


These schemes sell products directly; salesmen are compensated for their own sales as well as for those of people who join the company through them.

Most mlm companies are facing cases in the states.Police booked 1978 banning money circulation act cases on mlm companies.There is no clear law defanation in India for MLM/Direct selling companies.Corporate affairs ministry wants to bring new MLM/Direct selling law.

Leave a Reply

Your email address will not be published. Required fields are marked *