The public will be offered the chance to buy up to £4 billion worth of shares in Lloyds Banking Group below market price if the Tories win the General Election, David Cameron is set to announce.
The Prime Minister will say that existing plans to sell a £9 billion tranche of the taxpayers' stake will include a "retail offer" with a proportion of the shares being reserved for sale at a discounted price.
Buyers who keep them for a year will be rewarded with a "loyalty bonus" of one additional free share for every 10 shares that they still hold.
Mr Cameron will also confirm that, with Lloyds shares closing at 78.75p on Friday, shares will be sold below the "in price" of 73.6p - a share paid by the previous Labour government when it bailed out the bank following the financial crash of 2008.
Buyers will receive a discount of at least 5% on the market price at the time of the sale, with priority being given to investors purchasing up to £1,000 worth of shares.
The minimum purchase will be £250 and there will be a maximum limit of £10,000.
Lloyds Banking Group will pay its first dividend to shareholders in six years - since its 2008 bailout - after reporting annual profits of £1.8 billion.
The payments to the three million shareholders will total £535 million after the fourfold rise in annual profits.
Lloyds was rescued after an input of £20 billion taxpayer funds in 2008 at the height of the financial crisis.
The Government's 40% stake has since been reduced to 24%, meaning the Treasury will receive £130 million from the company's 0.75p a share dividend payment.
At least 9,000 jobs will be axed at Lloyds Banking Group over the next three years along with an unknown number of branch closures, Reuters has reported, citing sources.
The cuts would amount to 10 per cent of Lloyds' workforce and follow some 30,000 job axings by the company since the financial crisis of 2007 to 2009.
Reuters reported the job cuts will be announced by Chief Executive Antonio Horta-Osorio in a three-year strategy review next week.
The report said the increase of online transactions and automated bureaucracy will lead to the closure of some branches.
The chairman of Lloyds Banking Group has admitted the company's manipulation of key interest rates was "truly shocking".
The company has been slapped with a £218m fine from US and UK regulators for manipulating the LIBOR inter-bank rate and the Repo Rate.
The Repo Rate was the benchmark used by the Bank of England to calculate how much banks paid to take part in the Government's Special Liquidity Scheme (SLS) to support banks during the financial crisis.
Lloyds chairman Lord Blackwell has replied to a highly critical letterwritten to him by the Bank of England's governor, Mark Carney.
"I absolutely share your concern about the nature of the SLS conduct, and in particular its implication for reducing fees," Lord Blackwell wrote.
"This was truly shocking conduct, undertaken when the Bank was on a lifeline of public support."
He also agreed that Lloyds would pay nearly £8m back to the Bank of England for fees it should have paid for the SLS.
The governor of the Bank of England has warned that Lloyds and its subsidiary Bank of Scotland could face "further action" over the manipulation of benchmark interest rates.
In a letter to Lloyds chairman Lord Blackwell, Mark Carney said the BoE's Prudential Regulatory Authority would now consider whether to take further steps.
"In view of the seriousness of this matter, the PRA will consider whether further action should be taken in relation to the Firms or individuals at the Firms."
The banks have been fined for manipulation of the LIBOR rate and Repo Rate.
Bank of Scotland was formerly part of HBOS, which was taken over by Lloyds in 2009.
The governor of the Bank of England has strongly condemned Lloyds Banking Group for its attempts to manipulate two key interest rates.
Part of Lloyds' £218m fine from US and UK regulators relates to its attempts to reduce the fees it paid to the Bank of England for the Special Liquidity Scheme - a government programme to help struggling banks during the financial crisis.
The Bank of England has now published a letter from governor Mark Carney to the chairman of Lloyds, Lord Blackwell.
"Such manipulation is highly reprehensible, clearly unlawful and may amount to criminal conduct on the part of the individuals involved," Mr Carney wrote.
About £70 million of Lloyds' fine from financial regulators is for trying to manipulate the fees payable to the Bank of England for taking part in a government scheme to support British banks during the financial crisis.
The group is set to pay a total of £218 million to UK and US authorities after it became the latest lender to be punished over the rigging of interest rate benchmarks.
Lloyds said the manipulation took place between May 2006 and 2009, adding that those involved have either left the company, been suspended or are subject to disciplinary proceedings.
Barclays was the first to settle Libor rate-rigging claims, paying £290 million in penalties to US and UK regulators in June 2012, while state-backed Royal Bank of Scotland was hit with a £391 million settlement.
Lloyds Banking Group has agreed to pay fines worth £218 million to UK and US regulators in relation to the manipulation of Libor.
The US authorities have charged the bank with "manipulation, attempted manipulation and false reporting of Libor" between April 2008 and September 2009.
The firms manipulated the benchmark interest rate at which banks lend money to each other in order to reduce the amount it paid in fees to Bank of England.
Lloyds Bank is to cut another 500 jobs, bringing the total number lost to around 30,000 since the banking crisis unfolded in 2008, said the Unite union.
Lloyds Bank has increased the number of shares it is selling in TSB as a result of strong demand from investors.
The bank, a quarter of which is owned by the taxpayer, had initially decided to sell a 25% stake in TSB but has now upped the proportion to 35%.
The shares have been priced at 260p each, giving TSB a market value of £1.3bn.