Britain has sold a £2.1 billion stake in Royal Bank of Scotland to kick off the disposal of its holding, seven years after bailing out the bank.

The country’s finance minister George Osborne hailed the sale as "an important first step in returning the bank to private ownership" and said it was right to start selling the stake at a loss to the price paid for the shares in 2008.

"While the easiest thing to do would be to duck the difficult decisions and leave RBS in state hands, the right thing to do for the economy and for taxpayers is to start selling off our stake," Mr Osborne said.

"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," he added.

Osborne said the proceeds would be used to pay down the country’s national debt.

Royal Bank of Scotland is the parent company of Ulster Bank and Britain’s Natwest.

UK Financial Investments, the body that holds the government's RBS stake, said it had sold 630 million shares, representing 5.4% of the bank, in a quick-fire sale to institutional investors after the market closed yesterday at 330 pence per share.

UKFI sold more shares than it had indicated, when it had announced it planned to sell 600 million shares in the bank. RBS shares closed at 337.6p yesterday , so the shares were sold at a 2.3 percent discount.

Britain rescued RBS with £45.8 billion of taxpayer cash at the peak of the credit crisis in 2008. The sale cut its holding to 72.9% from 78.3%.