Global credit ratings agency, Fitch has said that the plans to break up the Royal Bank of Scotland into separate entities would be an expensive mistake and leave taxpayers in a worse condition.

The agency said that the plans to split the bank into a good and a bad bank and selling the good bank would leave the government with more toxic assets and increase the national debt burden. The move would create uncertainty for investors and also dilute the government's holdings in the bank. The plans might also require an approval from the minority shareholders.

Independent investors have expressed their concerns over the plans to break up the Royal Bank of Scotland to the chairman Sir Philip Hampton. Sir Hampton has said that only independent minority shareholders will be able to vote on plans to split the bank into separate entities. Chancellor George Osborne said that the government is aiming to break up the Royal Bank of Scotland into separate entities.

The government has an 82 per cent stake in the Royal Bank of Scotland and indicated that the bank might be split into a good bank and a bad bank with troubled assets. The bank had recorded a profit but was facing high level of toxic assets and the government officials have been looking for ways to revive the bank.

"RBS's solid half-year earnings, based on an increasingly robust balance sheet, are likely to reduce the benefit of implementing a bad bank split, as currently being considered by the UK government. A bad bank split is unlikely as we believe the costs, obstacles and uncertainties involved in transferring some assets to a state-run bad bank would exceed the benefits, in particular to the UK government as majority shareholder in the bank and potential acquirer of assets from the bank," Fitch said.