Maryland National Bank, the largest issuer of Master-Cards in the Washington-Baltimore area, has moved to cut back credit for about 200,000 or nearly 60 percent, of its customers.

In one of the broadcast credit curbs so far in the Washington area, the bank notified some 40,000 customers over the weekend that their charging privileges were suspended or their accounts closed.

Another 160,000 customers were notified that the bank was lowering their credit limits.

Left unaffected by the bank's actions were customers with low credit limits, $700 or less, and the bank's biggest credit users -- customers using 80 percent of more of their credit limit.

A bank spokesman described the actions as part of a pattern of steps designed to "limit growth, but do it in a moderate way."

Half of the customers who lost their charging privileges had failed to use the card during the past six months. Their charging privileges were suspended with the possibility that they might be reinstated. Another 20,000 customers whose cards were unused for a year or more had their accounts terminated.

The bank limited credit for 160,000 other customers by establishing a new formula for a card holdrs's line of credit that reflects how actively the credit has been used. Card holders will be allowed to charge an amount equal to a representative balance for the past six months to a year plus 20 percent.

"among credit card holders, the average credit limit was $1,400," said bank spokesman Daniel Finney. "the average balance was $625."

Generally the credit limit requires no drastic change in the way customers use their cards. What it does instead is to prevent any rapid expansion in credit use.

Customers using 80 percent or more of their allowable credit are left untouched because applying the formula to their balances would provide them with 100 percent or more of their existing credit lines.

"our overall philosophy is trying to implement a moderate plan, not to force the consumer to pay more or to pay more rapdily or to cut off their credit completely," said Finney. "a lot of those 125,000 unaffected are already at their credit limits and aren't going to be charging more anyway," he said.

In earlier actions the bank, which is the 15th largest issuer of MasterCards nationally, cut off approximately 21,000 customers who live outside of Maryland, its adjoining states and the District of Columbia. The bank also terminated approximately 1,000 chronically delinquent accounts.

Finney said the bank contemplates no further actions at this time.

Finney said the bank had begun to limit credit expanson before credit controls made such limitations mandatory. "we like to think we saw it coming and started to control growth last year," he said. Finney said that growth in credit under MasterCards issued by Maryland National Bank last year was 9 percent compared to a 20 percent industry average increase.

In other fallout from credit controls yesterday Citibank announced an immediate one-percentage-point increase in its mortgage rates, blaming the move on the increased costs of the money it borrows. The New York-based bank raised rates on mortgages for customers with accounts to 17.5 percent, with an additional one-time fee equal to 3 percent of the loan. The previous rate was 16 percent plus a 3 percent fee.

Non-customers must pay 18.5 percent plus a 3 percent fee for a mortgage, and rates on loans for co-ops were raised to 18 percent for customers and 19 percent for non-customers, with a 3.5 percent fee charged on both types of mortgages.

Mortgage rates in the Washington area now range from around 14.5 percent, with a large down payment, to as high as 17.5 percent.

Also yesterday operators of money market mutual funds asked the Federal Reserve Board to exempt them from credit controls. The Investment Company Institues, a trade association, petitioned the Federal Reserve Board to reverse its March 14 order that money market funds deposit 15 percent of new assets with the Fed.

The Institute claimed that the regulations discriminate against small investors who can only buy money market securities, such as U.S. Treasury bills by buying into a fund.