The government is probing whether Royal Bank of Scotland and Lloyds are failing to meet officially mandated lending targets by deliberately pricing loans to small and medium-sized businesses at artificially high levels.

“We don’t want them to make uneconomic loans but our research suggests they may be pricing credit at unrealistic levels,” said one person close to the government. In a sign Whitehall is tightening the screws on the two banks it part owns, the government has been scrutinising the banks’ loan pricing mechanisms over the past two weeks. “They are giving us a bloody hard time,” said one banker.