Small businesses struggling to make loan repayments and secure vital new credit were promised that banks would be held to account if they failed to relax onerous lending terms.

Lord Mandelson, the Business Secretary, is to chair a special forum of banks and business groups to ensure that small and medium-sized companies are not denied key funds.

The decision to form the new group came after a meeting of the chief executives of high street banks, Alistair Darling, the Chancellor, and Lord Mandelson.

Ministers have received complaints from businesses that lending has dried up and charges for borrowing have been raised to unaffordable levels. As a condition of the £37 billion government bailout, RBS, HBOS and Lloyds TSB must continue lending at 2007 levels. The banks have pledged to continue funding small businesses to that extent. Last year they lent £53 billion to the small business sector, which has a turnover of £1.4 trillion – 51 per cent of all private sector sales.

Last night Downing Street made it clear that the deal must stand. The Prime Minister’s spokesman said: “The banks have entered into this agreement and we expect them to deliver.” Business groups and MPs gave warning, however, that the forum must have real powers and not become a talking shop.

Stephen Alambritis, head of external affairs for the Federation of Small Businesses, said: “This is not new. Eddie George had a similar arrangement when he was Governor of the Bank of England. It is crucial that banks lend at branch level and not merely pay lip service in national agreements.”

The Conservatives accused the Government of leaving small businesses to struggle. Alan Duncan, the Shadow Business Secretary, said: “The idea that bank lending will continue on the same basis is fanciful and deceitful.

“Meanwhile, it’s becoming all too obvious that lending to small businesses is drying up. Even now banks are cancelling overdraft facilities at two days’ notice and driving many good small firms to the wall.”

The Public Accounts Committee is also to monitor whether the Treasury secures compliance from the banks about lending to small businesses and to homeowners.

David Frost, the director-general of the British Chambers of Commerce, said: “If its purpose is to hold banks to account and provide a supportive and worthwhile dialogue, then Lord Mandelson’s announcement of a new small business lending forum is a good thing. But if the group ends up around a table talking instead of showing real leadership and taking action, then it will be meaningless. It’s the Government’s job to ensure that this group has the teeth to really make an impact.”

Phil Orford, chief executive of the Forum of Private Business, said: "We are delighted that the Chancellor is talking to the banks about their treatment of small businesses. But we will be monitoring whether the banks actually deliver for the benefit of all small businesses and we'll be calling for more action if they don't."

Sources said that the bank chief executives used yesterday’s meeting to repeat their commitment to make available the same amount of loans as last year, albeit at higher cost. “Availability from our perspective hasn’t changed,” one banker said.

Angela Knight, the chief executive of the British Bankers’ Association, said that banks should not be expected to prop up businesses that were not tough enough to survive a recession.

“I don’t think anyone expects a bank to lend money to a business that’s lost its customers,” she said. “I know that’s uncomfortable but it’s the only right thing to do.” Ms Knight added: “What we can’t do unfortunately is reverse a poor economic situation. As talk turns to recession, it seems inevitable that some businesses will not survive, even with the best assistance that banks, government and voluntary agencies can give them.”

After the meeting, Lord Mandelson announced a reform of business support schemes for small companies. The Business Secretary told the Northern Regeneration and Renewal Summit in Manchester that ensuring that small and medium-sized enterprises had the “strong focus and targeted support” they required to get through the economic crisis was top of his intray.

Separately, Nick Clegg, the leader of the Liberal Democrats, and Vince Cable, the party’s Treasury spokesman, proposed an overhaul of the Small Firms Loan Guarantee Scheme, a substantial cut in interest rates, a new code of conduct on rearranging business credit and overdrafts, and an assistance package for small businesses struggling with energy bills.

Mr Clegg said: “Small businesses are crucial to bringing Britain through the recession. Our measures will give them greater protection against the consequence of bankers’ mistakes.”

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