The army of small investors who own shares in Britain's banks were up in arms yesterday, accusing the Government of adopting bullying tactics and allowing political manouevering to get in the way of sound commerce.

Roger Lawson, a director of the UK Shareholders Association (UKSA), said his members would be dismayed at the Treasury's plans to part-nationalise Royal Bank of Scotland, HBOS - the owner of Halifax - and Lloyds TSB.

The UKSA was approached yesterday by campaigners hoping to set up shareholder action groups and by "loads of people complaining about the terms of this privatisation", Mr Lawson said.

"I'm very much against these proposals now that we know the details. The Government has bullied these companies into taking on extra capital, when some of them didn't need to," Mr Lawson said.

"The terms are very onerous and are designed to make a massive profit for the Government at the expense of shareholders."

As part of its £37 billion lifeline extended yesterday, the government will pump about £9 billion into these three banks through the issuance of preference shares.

These shares will pay the Treasury an annual interest rate of 12 per cent - and will mean the end of dividend payments until the capital is paid off in full.

Analysts speculated yesterday that it may be several years before Lloyds TSB, in the process of taking over HBOS, can return to paying dividends, which represent the life-blood of the small investment community.

RBS will issue up to £5 billion in preference shares. The bank, which secured a total rescue package worth up to £20 billion, said it would prioritise paying off the preference shares but gave no predicted date for renewing dividends.

Barclays, which avoided a Government bailout with plans to raise £6.6 billion from strategic investors, said it hoped to begin paying dividends again after next June.

Mr Lawson said that he did not want to be a shareholder in a company controlled by the Government, predicting that the Treasury would "take political decisions about lending policies and interfere with commericial decisions.

"If shareholders have any sense they will vote against it," Mr Lawson said. Yesterday's various capital raisings are subject to shareholder approval, although it is thought highly unlikely that the proposals will be voted down.

Mr Lawson, a Lloyds TSB shareholder, said he had sold his stock on principle, suffering a considerable loss.

Professional City investors, including the pension funds that manage individual savings, are also likely to be deterred by the absence of dividends, experts said.

"One leading institutional shareholder, who declined to be named, said yesterday: "In some case the dividend is the only reason for holding a particular bank. You have to ask yourself what is the case for owning banks. It is difficult to see who are the natural buyers and holders."

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