Lord Mandelson acknowledged that the Government could not force the high street banks to cut rates, but he cautioned that small businesses and mortgage-holders would expect to see the benefit of a widely-predicted cut in rates by the Bank of England later this week.
One of the conditions of the Government's bail-out when it took a £37 billion stake in some of the country's leading high street banks had been restoring credit lines, he said.
Lord Mandelson told the BBC Radio 4 Today programme: "When official rates are being cut, it is not unreasonable for customers to see some benefit from that.
"People want to feel the benefits of that action and if it appeared that the banks were standing in the way between what the Government is doing and how the public wants to benefit, then I think many banking customers are going to be asking some difficult questions of the banks."
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