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New Delhi, April 8, 2025 – The Reserve Bank of India (RBI) has clarified that its press release, dated 1st January 2015, was intended to solely caution the public and it did not provide any regulatory instructions or guidelines to the banks, following a representation by the Association of Direct Selling Entities of India (ADSEI). The RBI, in its communication, further stated that the press release did not mandate banks to put restrictions or denial of opening of accounts.
“We are pleased to acknowledge RBI’s response to our representation regarding the public circular dated 1st January 2015. The RBI clarification has come as a big relief for all the Direct Selling entities that have been facing challenges due to the banks arbitrarily restricting banking operations, freezing bank accounts and restricting payment gateways. This resulted in operational hurdles for the Direct Selling entities in the country, leaving a severe economic impact. The RBI response makes it clear that the circular does not mandate or provide any regulatory instructions or guidelines for the banks and that it was issued merely for public caution,” said Dr. Sanjeev Kumar, President, ADSEI.
Taking reference of paragraph 37(b) of the Master Directions on Know Your Customer 2016, which requires banks to closely monitor transactions in accounts of marketing firms, especially accounts of Multi-level Marketing (MLM) the RBI response further stated that it does not mandate banks to put restrictions on bank accounts of MLM companies or not open bank account for such entities.
ADSEI had appealed to the Finance Ministry and the Reserve Bank of India (RBI) underlining the issues being faced by the Direct Selling entities in banking operations, opening of accounts, freezing of accounts and hurdles being faced with payment gateways resulting in challenges related to banking operations. The ADSEI representation also stated that the Consumer Protection Act, 2019, recognizes Direct Selling as a legitimate business model in India and that by the enactment of the Consumer Protection (Direct Selling) Rules, 2021, the Government of India has clearly established a robust regulatory framework for the Direct Selling sector, distinguishing it from illegal financial schemes.
“The said RBI circular has been misinterpreted by the banks for a long time, causing severe economic consequences to the Direct Selling entities. ADSEI reached out to the concerned departments with a request to address the long-pending issue in the interest of the ethical Direct Selling entities in India. The RBI response is a testament of ADSEI’s perseverance and continuous endeavour in working towards creating a conducive business environment for the Direct Selling industry,” added Dr. Kumar.
ADSEI has been relentlessly working to serve as an intermediary between Direct Selling entities and the government, representing the fairness, ethics and best practices of Direct Selling while also addressing issues & challenges of the industry and get timely policy interventions in resolving the same. ADSEI pledges to get the due recognition for the Direct Selling industry by collaborating with the government and other industry stakeholders and to promote ethical, responsible practices in India.
