According to the Financial Times, senior government ministers were discussing a potential full takeover of RBS, which is already 82 per cent owned by the government, to help boost business lending to companies.
The balance 18 per cent of the bank is owned by private investors and it would cost the government around 5 billion pounds to buy them out, it added.
Chancellor George Osborne is opposed to fully nationalising RBS, which would mean taxpayers taking full responsibility for the bank's toxic debts, the report said.
Another UK daily said Business Secretary Vince Cable is in favour of a split in RBS to create a business bank with a clean balance sheet and a mandate to expand lending.
RBS is scheduled to announce its half yearly earnings tomorrow.
