Part-nationalised banks have pledged £94 billion in extra loans for struggling businesses in the coming year, the Chancellor said today.
Alistair Darling said Royal Bank of Scotland and Lloyds Banking Group have agreed to lend nearly half the total amount to smaller companies.
RBS, which is 84% taxpayer-owned, said its deal with the Government involved extending £50 billion in gross lending to firms.
Lloyds has agreed to lend £44 billion to firms in the coming year under the new agreement.
The revised lending arrangements mean targets for loans to firms will be measured in gross terms, which do not include repayment levels.
Last year the banks missed their required business lending levels as recession-hit customers looked to repay debt.
Both banks comfortably met their mortgage lending targets in the last 12 months however and these will continue to be measured in net terms.
Lloyds' target will remain at £3 billion for the coming year, while RBS has seen its commitment reduce to £8 billion, as the target was balanced over two years after the 2009 level was increased from £9 billion to £10 billion.
The Budget document said that the new agreements were legally binding but stopped short of outlining specific penalties if the banks failed to comply.
It said if the banks were judged not to have met their targets, UK Financial Investments (UKFI) - the body charged with managing Government banking stakes - would "work with the remuneration committees of the relevant banks to determine the appropriate consequences".
The Treasury said business lending across the economy has been more subdued than mortgage activity as banks and customers reassessed risk, while uncertainty over the economy reduced demand for finance.
According to the Budget document repayments for corporate loans in 2009 were £19 billion greater than the total level of new lending.
"There is evidence that large businesses, have, in particular, been using money they raised from capital markets to repay bank lending," it said.
RBS committed to lend an extra £25 billion in the 12 months from March 2009 on a net basis - with £16 billion in loans to firms.
Meanwhile, 41% State-owned Lloyds agreed to lend £14 billion over the year in return for its bail-out, including £11 billion to companies.
RBS lent a gross £41.4 billion to businesses in the period, but cautious businesses looking to clear debt left it with a net repayment of £6.2 billion.
Lloyds handed out £38.3 billion to firms, but its net figure also undershot the target at £5.7 billion.
RBS and Lloyds achieved mortgage lending of £12.7 billion and £4.4 billion respectively after repayments are taken into account.
RBS chairman Philip Hampton today said the bank had the capital to make the new lending available to customers.
"The right amount of debt for business will be greatly influenced by the pace of economic recovery," he said.
"We are committed to ensuring our credit worthy personal and business customers can access the funding they require."
Lloyds said it would play an "active part in the UK's economy" through its lending.
"We will also maintain our extensive participation in the wide range of Government schemes designed to support lending to businesses and homeowners," the bank said.
"We are committed to helping our customers through these challenging times."