New British banking venture NBNK has submitted a bid proposal for Northern Rock, a source with knowledge of the matter told Reuters, putting NBNK in competition with Virgin Money for the nationalised British bank.

They bid today, said the source, who declined to provide further details on NBNK's proposal.

NBNK is also bidding for some 630 bank branches which part-nationalised bank Lloyds has been ordered to dispose of by regulators.

The source said the Lloyds branches remained NBNK's priority, and that NBNK would look to combine Northern Rock with those branches to form a new challenger UK bank.

The priority target is and has always been the Lloyds branches. Northern Rock would bring with it a really good infrastructure, deposits and fantastic staff and would get them up to six percent of the personal current accounts market, added the source.

Northern Rock was fully nationalised three years ago after suffering a run on its deposits during the credit crunch. Chancellor George Osborne said in June that he aimed to find a buyer for it this year.

(Reporting by Sudip Kar-Gupta; Editing by Myles Neligan)