The payment in B shares for membership of the insurance scheme for 325bn of RBS's potentially toxic assets would see the taxpayer stake in the bank rise from the current 70 per cent to about 85 per cent. But shares in the group closed down 2.9p, or 5.2 per cent, at 53.4p as the City reacted coolly to the possibility of an RBS cash call on investors just 15 months after its 12bn rights issue last year.
RBS issued a statement last night after the market had closed saying it was "considering whether there are any partial alternatives to the issuance of B shares to the government. These considerations are tentative only and there are no firm plans to put to the board or shareholders".
One institutional investor in the bank said: "It's a bit of an aggravation, to be perfectly honest.
"It doesn't feel like the kind of thing to me that people are going to be thrilled about."
Some, however, criticised the relatively modest scale of any potential RBS rights issue compared with speculation that rival Lloyds Banking Group was mulling raising 15bn or more to limit or do away altogether with its participation in the government's asset protection scheme.
Simon Maughan, of broker MF Global, said: "It (RBS] looks quite disappointing. It looks decidedly unambitious when put against the Lloyds plan, which took on the government."
Banking analysts said RBS could look to an accelerated book-build, which would be swifter and easier than a traditional share issue and could allow it to sidestep a full prospectus.
In any full prospectus for a rights issue, RBS would be likely to give an update on its current trading following its record 24bn loss last year.