Northern Rock relies on capital markets rather than deposits for new home loans and was one of the hardest hit by rising credit costs, forcing it to seek emergency credit from the Bank of England.

The consortium, which included American International Group; Toscafund Asset Management, a fund focusing on investments in the financial services industry; the First Eastern Investment Group, a Hong Kong-based investment group; and WL Ross & Company, founded by the billionaire investor Wilbur L. Ross has, however, stipulated that it should not be forced to make a full takeover offer.

In the recent past Investment bank Citigroup, which was appointed as an advisor to Northern Rock in order to provide financing to potential suitors, has offered to provide funding to potential buyers of Northern Rock even as advisors of the ailing British bank are in talks with US buyout firms JC Flowers and Cerberus over a rescue bid, sources familiar with the developments said.

Last month the Bank of England had offered Northern Rock emergency funding since September 14, amidst a credit market crunch. The mortgage lender is estimated to have drawn about 8 billion pounds on the facility, at a penal interest rate.

Virgin said in an official statement late yesterday "A consortium led by Virgin Group, has today submitted a non binding indication of interest to the board of Northern Rock which, if consummated, will see the consortium inject substantial new equity into Northern Rock."

The proposal envisages that Virgin would take over the management under its retail-lending brand Virgin Money, which provides credit cards, home loans and insurance services.

The statement quotes Sir Richard as saying, "I believe that if we''re successful we''ll be able to create an exciting new banking alternative for everyone in the UK."

Northern Rock has yet to issue a formal response to the proposal.