The Chancellor downplayed reports of a giveaway to voters as he announced that ministers had decided not to break up the struggling bank.
Instead, around £38 billion worth of bad loans will be hived off into a separate organisation within RBS.
Mr Osborne did predict that the public could eventually get back the £46 billion spent bailing out the bank at the height of the financial crisis in 2008. However, he said that a sale of RBS was still some way off.
He said: "I think, quite frankly, it is unlikely before the general election."
He also played down the idea that taxpayers could be given shares in the bank when it was finally returned to the private sector.
He said: "I prefer the approach we have taken with Lloyds, which is we sell the shares and then we make a profit for the taxpayer. We can use that to pay down our debts which, collectively as a nation, sadly, we have too much of.
"I haven't completely closed my mind to it but I have to say the most preferred option, I think, at the moment is the approach we have taken with Lloyds."
The decision not to break up RBS drew a mixed response yesterday.
Andrew Tyrie, the influential chairman of the Common Treasury Committee, said MPs would be examining whether the move was another missed opportunity to turn around the ailing institution.
Labour said they would scrutinise the Government's plans for RBS very carefully after the "firesales" of Royal Mail and Northern Rock.
The decision received the backing of former Labour chancellor Alistair Darling. However, he said a lot of the bad loans, particularly Irish property assets, would need to be sold at a loss.
He said: "You need to remember what these things actually are. They are lending on, in many cases, Irish commercial property which is never going to recover.
"You are not going to get your money back on that and I'm afraid that's just a consequence of some of the foolish decisions taken by not just RBS but other banks at the time, because they have all had to engage in quite extravagant write-offs."
Ministers had been considering splitting RBS into a "good" and "bad" bank, an idea backed by former Bank of England governor Sir Mervyn King. In the end a Government-commissioned report concluded that such a move would do more harm than good.
Yesterday, RBS shares slumped almost 6% as the bank also posted pre-tax losses of £634 million compared with £1.37bn losses a year earlier.
A report published yesterday also criticised the bank's record of lending to small businesses.
It's author Sir Andrew Large found a range of problems in the way RBS treats small and medium-sized enterprises, including long delays approving loans.
Toxic loans at Ulster Bank make up nearly one-quarter of the £38 billion of bad debts being hived off into the new internal "bad" bank at RBS. The Unite union has warned against further redundancies and said the bank has already cut staff numbers to the bone after losing 30,000 jobs.
It was also announced yesterday that taxpayer support for the bank will be reduced by another £8bn after the so-called Contingent Capital Facility, which provides a source of capital, was removed a year early.