Islamist group Ansar Dine along with secular Taureg rebels seized control of northern Mali, an area bigger than France, following a military coup in March, 2012 but later the Islamists groups took advantage of their better training and took control of key towns of northern Mali.
Mr Ban said that the Council should consider asset freezes and travel bans against the rebels, who have faced widespread condemnation for human rights abuses.
“The area is in danger of becoming a “safe haven” for terrorists,” the UN chief feared.
Mr Ban told the Security Council that recent developments had brought “enormous suffering to the people of Mali”.
“A severe food security and nutrition crisis is now affecting 4.6 million people in Mali,” he said, adding that hundreds of thousands of people had been displaced in the unrest.
Mr Ban also expressed concerns at reports of “serious human rights violations” committed by the rebels.
There has also been international condemnation of the Islamists for destroying centuries-old shrines to saints revered by Sufi Muslims in the ancient city of Timbuktu.
Spokeswoman for the West African regional bloc Ecowas Salamatu Hussaini Suleiman also addressed the Council. Ecowas is pushing for UN approval for the deployment of an intervention force.
An Ecowas mediator has met Islamist leaders in Mali and asked them to cut ties with al-Qaeda in the hope of starting peace talks between the rebels and the government.
However, Mr Ban said no meaningful dialogue had begun.