Royal Bank of Scotland was plunged into another scandal yesterday after admitting it had risked millions in taxpayers’ cash by misselling business loans.

Labour shadow business secretary Chuka Umunna has demanded an urgent probe into other institutions lending cash via the Enterprise Finance Guarantee scheme.

The RBS scandal is linked to a set of 9,000 loans worth £900 million that it granted to small firms under the taxpayer-backed initiative.

Ministers launched the guarantee in 2009 to try to get banks lending again following the 2008 financial collapse.

It guaranteed taxpayers would fork out 75 per cent of the value of a loan to lenders if a customer defaulted.

But complaints about the way the loans were presented by RBS led to an initial probe by the state-run British Business Bank, which oversaw the funding.

It turned up a significant number of cases where small businesses were misled into believing that the government guarantee would cover them in case they got into trouble.