The government has issued a stern advisory cautioning the public against participating in multi-level marketing (MLM) schemes that misuse the Nidhi company structure. Regulatory authorities have observed a growing trend where certain operators are illegally combining deposit-taking activities with pyramid-style referral incentives under the guise of legitimate Nidhi operations. These hybrid schemes typically promise extravagant returns for both deposits and member recruitment, violating the core mutual benefit principles of genuine Nidhi companies.

The Ministry of Corporate Affairs has directed all regional registrars to intensify scrutiny of newly registered Nidhi companies and investigate existing ones showing unusual deposit growth patterns. Officials clarified that authentic Nidhi companies never offer commissions for bringing in new depositors or operate multi-tiered reward systems. A special enforcement team has been formed to identify and take immediate action against such fraudulent operations, which often target financially unsophisticated individuals through social media campaigns and local network meetings.

Consumer protection agencies have launched awareness campaigns educating citizens to recognize red flags in these MLM-Nidhi hybrid schemes, including pressure to recruit new members and complex bonus structures. The government has also proposed amendments to the Nidhi Rules that would explicitly prohibit any form of network marketing within these mutual benefit societies. Genuine Nidhi companies have welcomed these measures, as the fraudulent schemes have been damaging public trust in the entire sector and creating regulatory complications for compliant operators.