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* 700 mln stg lent to manufacturing firms in last 6 months
* Lloyds' net lending fell in last quarter of 2012
By Matt Scuffham
LONDON, March 31 (Reuters) - Britain's biggest retail bankLloyds said on Monday it was on course to beat its owntarget of lending 1 billion pounds ($1.5 billion) to UKmanufacturers before September 2013.
Lloyds, which is 39 percent owned by the British government,said it had lent 700 million pounds to manufacturers in the pastsix months, following the launch of its 'ManufacturingCommitment' last September.
"We have already seen a great appetite from manufacturingbusinesses that want to invest and expand even in theseuncertain times," David Oldfield, head of SME and mid-marketbanking at Lloyds, said in a statement.
Lloyds is using the Bank of England's flagship Funding forLending (FLS) scheme to offer firms a 1 percent reduction in theinterest rate for new business loans. The offer applies for thefull term of the loan and to businesses of all sizes.
The scheme was launched by the central bank and financeministry last June to aid growth by offering banks cheap fundsif they stepped up lending to home-buyers and small andmedium-sized businesses.
However, it has failed to stop an overall decline in bankloans. Although banks and building societies have drawn downalmost 14 billion pounds of cheap central bank funds, netlending has gone into reverse. In the last three months of 2012,Lloyds' cumulative net lending fell by 3.1 billion pounds.
Like other British banks, Lloyds is under pressure fromlawmakers to increase lending but faces a difficult juggling actas it must also strengthen its financial position to meettougher demands from regulators.
