Lloyds Banking Group and Royal Bank of Scotland (RBS) are to be instructed by the Government to lend £27 billion to small and medium-sized enterprises (SMEs) amid a fresh dispute over why they say they cannot meet lending targets promised to the Treasury at the time of the taxpayer bailout, The Times has learnt.

Lord Myners, the City Minister, will demand that the chief executives of the two banks comply with that promise when they are called to account by the Treasury’s Lending Panel, which is to meet soon.

The Treasury says that it has gathered evidence of significant loan demand from creditworthy businesses that the banks are failing to satisfy and it is concerned that the banks are pricing loans at unattractive rates.

It is understood that Lord Myners will deliver the demand to Stephen Hester, the chief executive of RBS, and Eric Daniels, the chief executive of Lloyds, at a meeting of the Treasury Lending Panel within a fortnight.

Although the Treasury will not disclose how it could force the banks to increase their lending, it is understood that Lord Myners is convinced that there is sufficient demand from small and medium-sized enterprises to justify the lending target.

The Treasury is concerned that the banks are hoarding funds that should be used to help business to grow instead of extending loans. It is also worried that the lenders are deliberately pricing loans at artificially high levels to suppress lending.

RBS has committed to extend loans to businesses worth £16 billion by March. Lloyds has pledged to offer £11 billion in the same time frame.

During the six-month period to June, RBS’s corporate lending book shrank by £18 billion and RBS business loans fell by £7 billion. However, it is believed that bankers have told the Treasury that they are unlikely to meet the corporate lending targets.

Lord Myners is expected to see executives from all of Britain’s main banks within a fortnight as part of the regular set of Lending Panel meetings held at the Treasury and hosted by the peer. Alongside executives, Lord Myners and Treasury officials, the banks’ credit managers are also invited to attend.

Lord Myners has made clear to the banks that they must increase lending to small and medium-sized businesses so long as they are creditworthy and there is demand for new loans. The Treasury is combing through lending data furnished by the banks to ascertain whether they are offering too high an interest charge to deter new loans.

The Government is anxious that banks inject new capital into small and medium-sized enterprises to help them to ride out the end of the recession.

Although RBS, Lloyds Banking Group and Northern Rock — all of which became state-controlled during the financial crisis — have signed up to increased lending commitments, other lenders that exploited taxpayer- funded programmes, such as the credit guarantee scheme, have offered to increase the size of their loans.

A spokesman for Lloyds Banking Group said: “We are playing our part in the UK’s economic recovery. We are focused on lending on our normal commercial terms and helping our customers through the downturn.”

A spokesman for RBS was unavailable. The Treasury declined to comment.

Lloyds is considering plans to raise about £11 billion in a rights issue. Alistair Darling, the Chancellor, has been briefed by Tom Scholar, of the Treasury, and is considering the papers over the weekend.

Treasury officials are understood to believe that Lloyds can go ahead with a fundraising, but that it will still have to partly use the Asset Protection Scheme (APS) because the total capital needed — as much as £26 billion — is too ambitious.

A failure to avoid the scheme would be a huge blow for Mr Daniels, who has been seeking to extricate the bank from the APS.

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