Reforms of the sector in the wake of the financial crash have made it much safer and there is now a "more humble and positive approach to behaviour", the Business Secretary said.
But small and medium-sized enterprises (SMEs) are still struggling to access cash from lenders, and state-backed RBS is one of the problems, he added.
In a speech in central London, Mr Cable said: "We are often told that the problem is bottoming out but in some ways it isn't.
"In the last 12 months there has only been two months in which that lending has grown. It's actually continued to contract."
Gross lending has risen but the net rate is still contracting at a "fairly constant rate", he said, adding that Lloyds and Santander are making strides to boost loans to businesses but RBS is holding down the figures.
"The effects of their contraction has outweighed the growth with the other banks so we still have negative net flows," he added.
Mr Cable said banks had set up a good appeals process for businesses, which had led to a third of the 3,500 cases overturned, but many companies remained unaware of it.
He added: "We want more sources of bank lending to business, we want more diversity."
The Liberal Democrat underlined the push for more challenger banks as a way of tackling the dominance of the major industry names and the grip they hold on lending.
But he told the audience of financiers that he was "critical" of the delays in the set up of RBS spin-off Williams and Glyn, which is "directly important" for business lending.
"To be frank, I'm frustrated and disappointed. It's been talked about for a very long period of time. It now looks as if it is not going to finally disengage from RBS until 2016.
"The sheer slowness of that process is a significant barrier to our getting a genuine challenge in the SME lending market."
An RBS spokesman said: "RBS is the biggest lender to SMEs in the UK and we are on target to grow new lending to small businesses by at least 10% to over £9bn this year. To encourage businesses to invest in growth we have proactively contacted over 280,000 business customers in the UK to offer them over £10bn new lending."