Britain's finance ministry said the European Commission had in principle accepted an alternative set of proposals that mean the bank will fund about 835 million pounds of measures to help so-called challenger banks and boost competition among lenders.

"It will see RBS fund and deliver a package of measures to improve the UK business banking market and is designed to boost competition, helping small and medium-sized enterprises benefit from greater choice and offers on banking services," the finance ministry said in a statement.

RBS had previously failed to sell a business banking division, Williams & Glyn, to resolve earlier competition concerns after it required the world's biggest banking bailout at the height of the 2008-2009 global financial crisis.

(Reporting by David Milliken. Editing by Andrew MacAskill and Guy Faulconbridge)