British competition watchdog has ordered Barclays to improve SME banking practices after it was found to breach previously agreed regulations.

In a statement, the Competition and Markets Authority (CMA) said that the lender did not comply with certain aspects of legal undertakings devised to protect small businesses.

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The undertakings were agreed by the British lenders in 2002 including Barclays. It prohibits lenders to force businesses to open current accounts to access other products.

However, CMA found that Barclays prevented the SMEs with Business Premium Accounts from transferring money to or from non-Barclays accounts.

Also, it insisted holders of Notice Deposit Accounts to open a current account with it.

The violations resulted in some SMEs incurring unnecessary costs. Barclays has agreed to take appropriate steps to address the two issues.

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Besides revising the practices, Barclays will have to pay around £2,000 in total compensation to affected businesses.

CMA senior director Adam Land said: “The Undertakings are clear that banks must not force small businesses to have current accounts with them, as part of a practice known as bundling. Bundling prevents small firms from being able to choose the best banking products for them and can result in unnecessary costs.

“The Directions issued today make clear Barclays must take immediate action to correct the problems they found and ensure they do not occur again.

“Small businesses should be confident that they can use loan and deposit account services at Barclays without being told that they are required to hold a business current account they don’t need.”