The Funding for Lending Scheme (FLS) is to be phased out over the next two years rather than halted at the start of 2016.
The Bank of England said the scheme, started in 2012 with a focus on mortgages but latterly used to help support small business lending, will be steadily restricted from January.
The move to extend FLS came because the bank said credit conditions for small businesses had not improved enough
Support for mortgage lending was withdrawn in early 2014.
"Conditions still remain relatively tight. So it is important that the support provided by the FLS is withdrawn gradually," BoE Governor Mark Carney said in a letter to Chancellor George Osborne.
The BoE said its Monetary Policy Committee judged the decision would not affect the timing of a future interest rate rise, and that its Financial Policy Committee welcomed the move.
Banks taking part in the FLS lent a net £1.1 billion to small and medium-sized businesses in the first six months of 2015, in contrast to a net reduction in lending of nearly £2b last year.
The biggest net lenders to small-and-medium enterprises during the period were Lloyds Banking Group and newer rival Aldermore, the data showed.
But some small businesses still mistrust banks, after they abruptly withdrew funding during the financial crisis.
The BoE has said poor access to credit was one reason why British productivity remained weak for years after the financial crisis, a situation which is only gradually starting to improve.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here