The lender has tabled a special resolution seeking permission to make off-market share purchases from the Treasury through a “directed buy-back” scheme.
Shareholders in the bank, which is currently 62 per cent state-owned, will vote on the proposal on 6 February.
The Edinburgh-headquartered group has been exploring a share buy-back programme since last year that would aim to bring the public holding to less than 50 per cent by the end of the current parliament.
RBS said the buy-back could take place as part of a placement by the Treasury at a price determined through an open-market book-building process. Or it could happen via a bilateral deal whereby the bank buys a certain number of shares at the relevant market price agreed with Treasury, independent of any larger placement of shares by the government.
The final method under consideration would be a trading programme in which a broker is nominated to oversee the daily purchase of a certain percentage of shares at the market price.
Under the proposal, the bank cannot buy back more than 4.99 per cent of the government’s stake in any one year.
Chairman Howard Davies said: “This resolution would provide the bank with the flexibility to use some of its excess capital to buy back government shares at a time and price agreed with HM Treasury.
“The board believes that this is in the best interests of the bank and its shareholders by helping to facilitate the return of the company to full private ownership.”