The Royal Bank of  Scotland (RBS) plans to raise 20 billion pounds by issuing shares to strengthen its capital base, amid the financial market crisis.

RBS would raise 15 billion pounds by issuing ordinary shares in open market at a price of 65.5 pence per share, the bank said in a regulatory filing with the London Stock Exchange.

It would raise another 5 billion pound by issuing preferential shares to the UK government, it added.

''The steps we have announced today, taken in conjunction with the government, will secure a stronger future for the RBS Group. We regret having to raise new capital but believe that decisive action is necessary in this unprecedented market environment,'' RBS chairman Tom McKillop said in the filing.

The recapitalisation would make RBS one of the best-capitalised banks in the world, enabling it to support customers and focus on its strategic goals, McKillop added.

McKillop, meanwhile, would retire as chairman at RBS' annual general meeting in April 2009.  Chief executive Fred Goodwin would step down and be replaced by Stephen Hester, who is currently chief executive of British Land and a non-executive director of the RBS Group, the filing added.

The capital infusion would raise RBS's pro-forma core tier I and II ratios by about three and four percentage points respectively, on a proportionally consolidated basis.

RBS shareholders would be invited to subscribe to all or part of their entitlements, while any new shares not taken up by them would be placed with HM Treasury at a fixed price of 65.5 pence per share, the release said, adding, new institutional investors may also be permitted to subscribe for new shares under the offer.

The offer, which is expected to close in November, is subject to shareholder's approval, the bank added.