The UK government has divested a 7.7% stake in Royal Bank of Scotland (RBS) for £2.51bn as part of its strategy to return the bank to private hands.

UK Financial Investments (UKFI), which handles the government’s stakes in banks, sold 925 million shares at 271 pence per share to institutional investors.

The shares were sold at a loss of £2.1bn to UK taxpayers compared to the 502 pence paid for each share when bailing out RBS in 2008.

Chancellor of the exchequer Philip Hammond said: “This sale represents a significant step in returning RBS to full private ownership and putting the financial crisis behind us. The government should not be in the business of owning banks.

“The proceeds of this sale will go towards reducing our national debt – this is the right thing to do for taxpayers as we build an economy that is fit for the future.”

The government intends to dispose RBS shares worth £15bn by 2023. The UK bank was rescued through a £45.5bn taxpayer bailout during the financial crisis in 2008.

The latest share sale is the first time since 2015 that the government has sold its stake in RBS. The sale decreases the government’s holding in the British lender to 62.4% from 70.1%.

RBS CEO Ross McEwan said: “I am pleased that the government has decided the time is now right to restart the share sale process. This is an important moment for RBS and an important step in returning the bank to private ownership.”