State-backed British lender Royal Bank of Scotland (RBS) is in talks with private equity firms over a plan for them to inject cash into its Irish arm, the Sunday Times reported, citing sources in London's City financial district.

The newspaper said Warburg Pincus, CVC, KKR and Permira were among private equity groups examining the proposals. The plan would involve private equity investors boosting Ulster Bank's capital position, after which the division would be merged with another Irish bank.

The new Ulster Bank would eventually float on the stock market, releasing capital for the private equity investors, the newspaper said.

The Sunday Times added advisers at PwC acting on behalf of RBS had circulated an information pack among potential backers, while Morgan Stanley was also working on the proposed transaction.

RBS chief executive Ross McEwan said in May he wanted to achieve economies of scale in Ireland and would be happy to work with other parties to achieve that. He said the bank would update on its plans in the summer.-Reuters