Royal Bank of Scotland is not out of the woods yet but will aim to hike lending to small businesses by at least 15 percent over the next three months, the bank said, in an effort to stave off criticism it is not doing enough to support the economy.

RBS, 83 percent owned by the British government after a taxpayer bailout, is due to issue a third-quarter trading update on November 4.

In an article in the Daily Telegraph, RBS CEO Stephen Hester said there was no use pretending RBS is out of the woods yet -- we're not.

But the actions we have taken mean we are well placed to play our part in the economic recovery, as people rightly expect us to, he added in the article published on Thursday.

The government has put pressure on banks to lend more or possibly face punishment in the form of higher taxes. Banks have argued that weak business confidence across the British economy has led to a dearth of demand for finance.

When businesses see uncertainty playing out on a global scale, they rightly feel nervous about their own prospects. This makes them less likely to borrow in order to expand, thus further undermining recovery, Hester said.

(Reporting by Keith Weir and Matt Falloon; Editing by David Holmes)