Dmitry Vasilyev, deputy chairman of the Federal Commission on Securities and Capital Markets, said the offer by Russia's banks was monopolistic and smacked of communism.
"When a small group of investors control a big part of the country's economy, we don't think this will help economic development," Vasilyev told a news conference.
"Monopolization is what we've been fighting for a long time. When a bank buys shares in a company or industries, this will make things worse. This is also not very positive for our industries. It's like carrying out communist ideology."
The banks, including Inkombank, Stolichny and Menatep, want to manage controlling stakes in top privatized firms for five years in return for lending the government close to $2 billion.
The financiers who masterminded the plan say it would allow the government to raise quick cash instead of dumping shares on illiquid Russian markets, depressing equity prices further.
The Kremlin appears eager to support the plan, under which banks will be offered stakes in such giants as Gazprom, the world's biggest gas monopoly, and Rostelekom telecommunications.
"Banks are extremely important in Russia, the biggest part of financial resources are concentrated in their hands," Mark Urnov, head of Yeltsin's analytical department, said.
"The consortium's proposal has got a lot of positive aspects. If we need a stable economic situation, we need to cooperate with mighty financial groups."
But critics say the government and powerful bankers are getting too close for comfort. They say the plan threatens to offer tremendous political power to a privileged group of banks.
"Yesterday they shared television stations, today they're splitting up companies among old friends," said former finance minister Boris Fyodorov, referring to President Boris Yeltsin's recent decree signing over Channel One, the only TV station to broadcast to the former Soviet Union, to a group of banks.
"These bankers are our robber barons," he told Reuters. "They support the government politically. It's a nice cozy world."
Few details have emerged on the terms offered by the banks.
"I spoke to some of these bankers, but it's not clear if these guys are serious," Fyodorov said. "There's only a general idea but no details -- 'if you need the money, we have it.' The question is what they will get in exchange."
Many brokers say the plan will not get off the ground amid opposition from rival industrial lobbies and other parties fighting for the spoils of privatization.
Gazprom's influential boss Rem Vyakhirov said this week: "For as long as I live, I will fight to prevent anyone from taking over trust management of Gazprom shares."
The vice president of LUKoil, Leonid Fedun, added: "LUKoil will never agree to this. LUKoil will manage its shares much more efficiently than the banks."
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