BRASILIA (Reuters) - Brazilian lender Banco Master is advancing in talks with investment bank BTG Pactual to sell assets left over after a deal in which state-controlled bank BRB acquired most of its capital, according to two people familiar with the matter.

The assets under negotiation include court-ordered payments and private equity holdings valued between 15 billion reais and 23 billion reais ($2.7 billion to $4.1 billion).

One of the sources, who requested anonymity because talks were confidential, said regardless of that outcome, Master is pursuing parallel discussions to secure international funding for its operations.

Master declined to comment. BTG Pactual said earlier this week that it is constantly analyzing consolidation opportunities that can bring value to the bank's shareholders and that have support from regulators.

The deal announced on Friday with BRB, which is controlled by the government of Brazil's Federal District, marked a dramatic new chapter in Master's trajectory, after years of rapid growth driven by a funding model reliant on issuing high-yield debt securities, distributed through investment platforms.

The transaction, still subject to regulatory approval, excluded many assets now on BTG's radar. A proposal from BTG could involve all remaining assets or only some of them, one of the sources added.

The divestitures come amid mounting scrutiny of Banco Master's funding strategy. The bank has said it operates within Brazil's banking regulations and that its critics are unsettled by its growth in the highly concentrated banking sector of Latin America's largest economy.

One of the sources said Master began lowering yields on its new debt securities, known as CDBs, on Wednesday as part of a gradual strategy to bring them closer to the market average following its sale to BRB.

($1 = 5.62 reais)