The society would begin lending up to Rs 1 lakh to its members within several months, said one of its directors Karan Bhosale, who is also an advocate and elected member of India’s largest state bar council. Loans would be backed by an informal guarantee of a senior lawyer and eventually the society also hoped to provide secured mortgage loans for home or larger purchases, he added.

“This idea came because most of us when we campaigned [for bar council elections], we realised that banks or credit card companies normally deny loans or credit cards to lawyers, just because they are lawyers,” said Bhosale.

Telemarketers selling credit cards or loans usually refuse to continue calls once they find out that the potential customer is a lawyer, claimed Bhosale. “Once they ask and we say we are lawyers, they explicitly mention that ‘we do not provide loans or credit cards to lawyers’. This has happened with everyone I know. It’s very disappointing but the bank obviously says we do not have any such policies,” he said.

It was an unwritten code not to lend to advocates, added one partner of a Mumbai-based corporate law firm on condition of anonymity. “I guess if they [lawyers] default recovery is difficult – it is difficult to find a lawyer to file a suit against a lawyer.”

Furthermore, lawyers practicing litigation in the courts are usually paid directly by clients on a per case basis, which could be a credit risk. “The banks feel jitterish in giving loans to a fellow who is more of a freelancer,” admitted Bhosale but argued that such decisions should be made on an individual basis. “You check the person’s credentials – if just because he’s a lawyer you reject him, that’s discriminatory and humiliating and insulting.”

The Indian Advocates Multi-State Multipurposes Co-operative Society Limited, which has been established under section 7 of the Multi-State Co-operative Society Act 2002, will be funded through its members. Around 900 advocates had by late last month contributed Rs 1,001 each for a total capital of Rs 9 lakh, but interest rates, repayment terms and other details were still being finalised with the help of a financial adviser on the society’s board and a chartered accountant, explained Bhosale.

Under the existing law it was possible for such a society to escape regulation of the Reserve Bank of India, said a Delhi-based lawyer who specialises in microfinance, which was similar to the model followed by some microfinance lenders. “In microfinance a lot of these non-profit entities set themselves up either as a society or a trust - that is much easier than setting up a Multi-State Co-operative Society,” he said. “That is an issue right now that a lot of guys are not being regulated.”