The bank will introduce the freeze on December 1st, affecting up to one million small firms.
RBS has announced that overdrafts for some of its business customers are to be frozen.
According to the bank, up to one million small firms will benefit from the temporary move, designed to ease the pressures some were feeling due to the credit crunch. The freeze is scheduled to come into effect on December 1st and to continue into 2009.
RBS is a major participant in the government's £37 billion bank recapitalisation scheme. Around £20 billion of public money is set to be used to buy equity stakes in the firm, which could mean that 60 percent of its stock comes under the government's control.
Ministers have already made clear that banks using this money to shore up their balance sheets should be lending more, which would in turn boost general spending levels and help stave off the worst effects of the current economic downturn.
Peter Ibbetson, chairman of small business for RBS, said: "The bank fully recognises that one of the biggest worries facing small businesses is the increase in the cost of borrowing and we believe this move will reassure our customers that the bank is committed to supporting them."
Speaking to the BBC, Stephen Alambritis, of the Federation of Small Businesses (FSB), added: "Now is the time for [banks] to wake up to the fact that they have been rescued, so that in turn they can rescue small businesses [which] 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."
