However, that path was abandoned earlier this year because of mounting costs and the complexity of separating the branches and the millions of customers that would have been involved.
Discussions on alternative remedies - known as 'plan B' - involved RBS giving direct financial help to smaller UK competitors.
RBS announced on Wednesday a preliminary deal on a package of measures worth £835m that would avoid the compulsory sale of W&G.
They included, the bank said, a £425m Capability & Innovation Fund comprising of 15 grants that eligible challenger banks and other financial services providers could compete for to increase their business banking capabilities.
A separate £350m fund would be available to "incentivise" SMEs to switch their accounts from the business previously described as W&G to eligible challengers.
The final details will be announced in the autumn, but the agreement in principle, announced after the markets had closed, was seen by ministers as moving RBS a step closer to being readied for sale back to private ownership.
It remains more than 70%-owned by the taxpayer because it is yet to rectify all the issues related to past mistakes, including a settlement with US justice officials on its sale of mortgage-backed securities ahead of the financial crisis.
The Economic Secretary to the Treasury, Stephen Barclay, said: "The announcement today will help boost competition in the business banking market and marks another significant milestone in resolving a major legacy issue at RBS.
"It builds on the recent settlement with the Federal Housing Finance Agency and together they show the progress being made to resolve RBS's outstanding issues."