Federal loans of $1.75 million to pay half the cost of renovating and reopening the O Street Market, which has been closed since the 1968 riots, were approved yesterday by the Commerce Department's Economic Development Administration.

The loans will go to Adkins Enterprises, Inc. of 1353 Randolph St. N.W., which is headed by black entrepreneur James Adkins.

Plans for the two-block site bounded by O.P. 7th and 9th Streets, N.W. call for rehabilitating and reopening the market, a designated historic landmark built in 1886, and building a new bank, a supermarket, a pedestrian mall and parking lot.

The food store will be a joint venture of the District of Columbia Development Corporation, the Shaw Community Citizens Pact and Giant Food, which as operating partner will run the store. The new Giant store will be the first new supermarket built in the city since the 1968 riots.

The disturbances were the final blow for the O Street market, which was fighting a losing battle to comply with health and sanitation standards.

When the market reopens, it will be a modern sanitary facility, with room for 18 to 23 shops, said William H. Harris, Jr., attorney for Adkins Enterprises. He said Adkins is now seeking tenants for the market and trying to find a bank or savings and loan to locate on the site.

Because the market is on urban renewal land, businesses forced out of other renewal areas will get preferance for the market shops, Harris said.

The project is supposed to create 244 new jobs in the economically depressed Shaw neighborhood, the Commerce Department said.

Adkins will receive two loans, a $100,000 loan to provide working capital and a $1,647,000 loan for the renovation itself.

The federal loan will pay half the cost of the project. Adkins has interim financing of $1.6 million from the Greater Washington Local Development Company and is seeking a permanent mortgage, his lawyer said.

Harris said Adkins might be able to begin work as early as next month. The job will take at least a year.

Construction of the adjacent Giant supermarket can start as soon as the paperwork for the joint venture is completed, said E. Tilden Kelbaugh, senior vice president for real estate and construction.

He said it will take about six months to build, equip and open the store, which will be virtually identical to Gian't newest suburban supermarkets. Giant's construction division will build the store for the joint venture and will run it under an agreement that guarantees community groups a voice in the staffing and operation of the store.

The plans for the site call for closing 8th street between O and P and turning it into a pedestrian mall.