However, they intended to first write to the bank to withdraw its circular on loan recall before moving the banking ombudsman, said a chief finance officer of an MFI which had taken a loan from the bank.
The Microfinance Institutions Network (MFIN), the representative body of MFIs, has already written to the Indian Banks Association and the Reserve Bank of India on the issue.
Recently, YES Bank recalled loans amounting to a few hundred crores to MFIs, citing the recent crisis in the sector and the resultant defaults by MFI borrowers.
"First, we will wait for the official response from YES Bank to our letter. If there is no response, the MFIs will move the ombudsman individually. The MFIN will also write to them," said a senior official of Spandana, an MFI based in Andhra Pradesh.
According to an official at Spandana, YES Bank had also raised the interest rate on the balance outstanding to about 17 per cent from the earlier 12 per cent. It also reduced the repayment tenure from 24 months to about a year
Repayments by borrowers from MFIs in Andhra Pradesh have fallen to as low as 20 per cent in the wake of the state government's moves against such lending, prompting YES Bank to recall the loan.
However, "Instead of using the term 'recall', YES Bank has used the phrase, 'reduction in facility amount''to safeguard itself. However, this amounts to recall in all senses," said an MFI official.
A bank reserved the right to recall a loan in case there were ground-level changes and also had the liberty to change the rates as well as the tenure, he said.
"YES Bank is obtaining the scheduled payments from Andhra Pradesh MFI clients," said a spokesperson of the bank.
The MFIs have also argued that they have not defaulted to any bank despite a credit crunch in the sector.
"We will take up the matter with the ombudsman. The MFIs have not defaulted, so the action taken by YES Bank is completely irresponsible and hard," said Alok Prasad, CEO, MFIN.
Earlier, in the face of the liquidity crisis after the Andhra developments, MFIs had sought a moratorium on loans, entailing rescheduling of payments by at least six months.
"At a time when we are negotiating with banks for a moratorium, the action by YES Bank will complicate the situation, as other banks may not be willing to extend the tenure of repayment," said an MFI official based in Andhra Pradesh.
The Reserve Bank of India has appointed a panel headed by Y H Malegam to review the regulations governing the sector. The committee's recommendations are expected by mid-January.