The UK government has signaled that it will start selling its stake in the Royal Bank of Scotland (RBS) to institutional investors in the coming months.

The Treasury will sell part of its 80% stake in the bank, which may incur initial loss as the shares are trading for less than the government paid for them during the global financial crisis.

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However, the entire rehabilitation drive for the rescued lenders, of which the sale is a part, will produce an overall profit of £14bn for the taxpayers.

Chancellor George Osborne said in his Mansion House speech: "It’s the right thing to do for British businesses and taxpayers.

"Yes, we may get a lower price than Labour paid for it. But the longer we wait, the higher the price the whole economy will pay. And when you take the banks in total, we’re making sure taxpayers get back billions more than they were forced to put in."

By starting to sell, the government will increase the free float of RBS shares which will improve the marketability of the remainder of its shareholding, paving the way for privatisation of the bank.

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Osborne added: "From bailing out the banks to bringing them back from the brink, now is the time for RBS to rebuild itself as a commercial bank no longer reliant on the state, but serving the working people of Britain."

RBS CEO Ross McEwan responded: "I welcome this evening’s announcement from the Chancellor and we are pushing ahead with our strategy to build a simpler, stronger, fairer bank that is totally focused on the needs of its customers and centred here in the UK.

"When the Government starts selling its shareholding, it will be selling a bank determined to be the best in the country."