The Royal Bank of Scotland (RBS) has announced fixed overdraft contracts and rates for its business customers for at least the next 12 months.

The move means small businesses will not be subject to credit lines being cut at short notice; something which is pushing many viable small companies to the verge of bankruptcy.

The decision was welcomed by the Federation of Small Businesses (FSB), which called on other lenders to make similar pledges to small firms following the recent government bailouts of leading financial institutions.

"Now is the time for them to wake up to the fact that they have been rescued, so that in turn they can rescue small businesses," said Stephen Alambritis, a spokesman for the FSB.

"Small businesses are aggrieved at the way they have been unfairly treated by the banks and they expect the government, which now has a stake in the banks, to resurrect that balance."

RBS shareholders recent voted to accept a government bailout to the tune of £20bn, which will see the state take a controlling 60% stake.