The Carter administration's proposal to permit phased-in banking across state-lines will get a cautious reception on Capitol Hill, according to the new banking committee chairmen.

While assuring that the proposal would be considered along with others in congressional hearings, Rep. Fernand St Germain (D-R.I.) said, "There remain serious questions about the possibility of mustering a consensus for substantive change among the diverse interests in the financial community or among members of Congress."

Sen. Jake Garn (R-Utah), a conservative with a well-known bias in favor of preserving small banks, declared, "The big boys -- the Chase Manhattans -- can fend for themselves; they don't need any special help." But he added his mind is not closed toward the Carter proposal and he plans to hold hearings some time in 1981.

A report on the Carter plan, prepared by Orin Kramer, associate director of the president's domestic policy staff, calls for a gradual relaxation of geographical restraints on banking, beginning with the Douglas Amendment to the Bank Holding Company Act. This prohibits bank holding companies from acquiring banks in other states except where the states specifically permit it. The administration suggests Congress might, however, wish to limit the expansion at first to natural market areas -- the metropolitan Washington area is a good example -- or to a specified percentage of local market share.

Relaxation of the 1934 McFadden Act, passed out of a fear of undue concentration of financial power in the hands of a few banks, would come later for so-called "bricks and mortar" branches. Banks would be permitted right away to set up interstate electronic funds transfer terminals in natural market areas. Nationwide EFT machines would be permitted at a later date. Finally, the report urges passage of a bill allowing banks from out of state to acquire failing or troubled banks under certain circumstances.

Kramer repeatedly stresses throughout the report that the changes are necessary to restore banks' declining share of the market and that rather than paving the way for big banks to take over small banks, interstate branching will benefit banks and consumers alike through increased competition. He contends that some reduction of the number of banks through mergers is inevitable due to economic conditions whether or not interstate branching is passed.

Reaction to the proposal from the banking community was predictably divided according to size, with the larger institutions in favor and the smaller ones opposed. Yet, even its most ardent advocates admitted that interstate branching is still some years away. They point out that the reforms passed in the Depository Institutions Deregulation and Monetary Control Act of 1980 were a decade in the making and interstate branching is equally controversial.

The Consumer Bankers Association, which represents 340 of the largest banks engaged in retail banking, favors relaxation of geographical restrictions. Spokesman Drew Tidwell said major New York and Philadelphia banks are most anxious to move into suburban markets in adjoining states. He conceded that small banks still have enough clout to delay or defeat such legislation now. Yet he added he expects that two or three years hence small banks will be sufficiently weakened by competition that they will no longer be able to block interstate branching.

The American Bankers Association, with both large and small members, called the White House study "comprehensive, challenging and controversial," but added this caveat: "It is worth remembering that the incoming administration is in no way bound to the recommendations contained in this report nor are the chairmen of the House and Senate banking committees, who are also new and who will have their own views."

The Independent Bankers Association, an organization of 7,200 small and medium-sized banks, said interstate branching would mean "significant growth in concentration of deposits rather than an enhancement of competition among financial institutions, as the [White House] report claims."

William O'Connell executive vice president of the U.S. League of Savings Associations, said the vast majority of savings and loan associations are strongly opposed to interstate banking because the proposed legislation "opens a wedge for superbanks to gather deposits nationwide." O'Connell called the White House report "a New Year's present the Congress would just as soon as not have received." He predicted that it would be one of the lower priority items in the Reagan administration.

The league's views are not shared by most District savings and loans which would like to establish branches in the suburbs. Interstate branching "is a thing of the future; it will be good for competition," said James Harris, president of the Metropolitan Washington Savings and Loan League.