Proponents say it is the speediest way to inject much-needed cash into Russia's bruised economy, and argue that the deal is better than maintaining state enterprises completely under the government's thumb.
But critics say the proposal could concentrate power in an oligarchy of wealthy bankers and state bureaucrats, and could eventually lead Russia to sell off its valuable natural resources for short-term gain.
They also worry that a plan involving only Russian capital will discourage desperately wanted foreign investment, which last year reached only a disappointing $1 billion.
''Both Western and Russian investors should have a place in the privatization process, so if the plan goes through in its present form without any changes, it will hurt foreign investors,'' says Alexander Livshits, Mr. Yeltsin's chief economic adviser. ''So certain amendments are needed [to protect foreign investment].''
The new investment consortium of at least seven top banks has offered to loan the state 9 trillion rubles ($1.8 billion), or 15 percent of the 1995 budget deficit, according to Evgeny Saburov, director of investments for Menatep, one of the banks involved.
In return, the state would give the consortium control over certain predominantly blue-chip companies, most of which would likely be in the oil, gas, and nonferrous metals industries. Many details must still be ironed out.
''I have spoken to Yeltsin, and he is completely favorable to the idea. But he says that some changes need to be made,'' says Mr. Livshits. ''I don't think we should reject the proposal, but it needs to be actively worked on.''
Although the government has privatized thousands of formerly state-owned enterprises, it has maintained a large stake in many private businesses, including a 51 percent controlling stake in many.
The group's leap into the government sphere is not unique in Russia, where commercial banks are seeking higher profiles in both business and politics. Last month a pro-Yeltsin ''Stability'' political faction was formed with financial backing from eight prominent banks.
But some banks not included in the investment proposal say it gives the new group an unfair advantage over the competition.
''I'm a little nervous,'' says Vladimir Chernov, deputy general manager of International Moscow Bank, which is not a consortium member. ''If this were only a move to help the state authorities fill in budget gaps that would be one thing. But the exposure they gain may be used to achieve special standing in the banking community at the expense of other banks and customers.''
Mr. Saburov, a former prime minister of Ukraine's Crimea peninsula, say opposition to the proposal among some anti-reform members of parliament is a result of decades of Communism -- and cannot be changed easily.
''It's past time to admit reality, that national capital is not state capital, like it was under Communism, but private capital,'' he says. ''Admitting that [point] remains the most important task of reform.''
But Mikhail Berger, a liberal economic analyst for the Izvestiya daily, wrote recently that the plan could derail reform by increasing domestic debts.
He warned that it could worsen the economic situation to such an extent that the International Monetary Fund (IMF) would cut credits to Russia.
''This plan has, in my opinion, as much chance of destroying the government's attempts at financial stabilization as it does of helping push forward economic reform,'' he wrote.
On Tuesday, the IMF approved a $6.8 billion loan to Russia. The 12-month stand-by loan is aimed at bringing monthly inflation down to one percent by the second half of 1995 by tightening monetary policy and cutting the fiscal deficit.
Credits for the loan will be issued in monthly installments to ensure that Russia does not stray from the reformist path. They can be stopped if the government wavers on its promises.