AIB and Bank of Ireland are unlikely to meet their targets of €3 billion each in lending to small and medium-sized businesses this year.
The Credit Review Office says that the main reason for the predicted shortfall in lending is that demand for credit from small businesses is low.
The Credit Review Office was set up almost 18 months ago to help small firms who had applications for credit turned down by AIB or Bank of Ireland appeal the bank's decision.
Publishing his fifth report, credit reviewer John Trethowan says the two main banks are unlikely to meet their targets this year.
His report suggests the main reason is that demand for credit from small businesses is low, and most firms are focused on repaying loans rather than securing new ones.
But the Small Firms Association blames Central Bank policy that forces banks to be 'ultra risk averse' and has called on the Department of Finance to carry out a comprehensive survey of companies' lending needs.
And small business group ISME described the reported lack of demand for loans as 'arrant nonsense', with chief executive Mark Fielding claiming the CRO was 'rapidly becoming the main mouth-piece of the banks'.
He said reports of a lack of demand for credit were 'completely contrary' to the views regularly being expressed to ISME from its member companies.
Mr Trethowan, who in the past has pointed to a lack of skills at the banks, has now called on business agencies to work to help educate the small and medium-sized business sector on its business planning and financial skills.
The Irish Banking Federation said the CRO's finding that many SMEs need to improve their business planning and financial skills called for a response from business groups, State agencies and the banking sector.
The IBF said it was working with Chambers Ireland on the development of a new website to provide a one-stop source of financing information for small businesses.
