The UK's state-owned Royal Bank of Scotland (RBS) has been extending credit - including a US$100 million letter of credit (L/C) - to controversial mining firms.

RBS was bailed out with taxpayers' money last year as a result of the toxic loans it had amounted before the credit crunch bit; thus, the UK Treasury has oversight over the bank.

But three campaign groups - World Development Movement, Platform and People & Planet - have brought a case against the Treasury.

Contrary to policy

The campaign groups argue that financial support provided by RBS to a range of companies engaged in activities ranging from coal mining to Arctic oil drilling is contrary to wider policy commitments on climate change and carbon emissions.

They say that taxpayers' funds invested in RBS should be spent only on projects that promote a "sustainable and ethical future."

Vedanta Resources

One deal that has drawn particular criticism is a loan by RBS to the controversial Vedanta Resources mining companies.

Its activities have been criticised by the UK's Business Department, which accuses Vedanta of disrespecting the rights of indigenous people over its plans to build a bauxite mine near the holy mountain of Niyamgiri, in the Indian state of Orissa.

Takeover bid

RBS was the lead financial adviser to Sterlite, in which Verdanta has a 60 per cent stake, during a takeover bid.

The bank and its ABN Amro subsidiary also issued L/Cs valued at US$100 million to copper producer Sterlite.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.