If interstate banking becomes a reality, the Washington metropolitan area may well become the crucible in which it is tested.

A gradual relaxation of legal prohibitions against banks establihsing branch offices and accepting deposits in neighboring states was recommended this week by the Carter administration. The concept is very controversial, however, and Congress is not likely to change the law in the near future, if indeed ever.

Nevertheless, release of the long overdue White House report was a tonic for District bankers and thrift executives who have been itching for years to expand into the affluent Maryland and Virginia suburbs.

"The time for interstate branching has come," said Jarvis Moody, chairman of American Security Corp., the holding company for the District's second largest bank. "And I can't think of a better place than the Washington metropolitan area."

James L. Harris, president of Washington Federal Savings and Loan, said, "We intend to be aggressive" (in expanding).

The first step proposed by the White House is a change in the Douglas Amendment to the 1956 Bank Holding Act. The amendment prohibits multi-bank holding companies from acquiring banks in other states unless the host state specifically permits such transactions. The act was updated in 1970 to include one-bank holding companies.

The White House report concluded it would be "less disruptive to the dual banking system" -- read "more acceptable politically" -- to start with the Douglas Amendment and only later tackle the restrictions in the McFadden Act of 1927 and the Banking Act of 1933. These two half-century-old laws effectively set the limits for bank expansion at state boundaries. (The report does, however, make a distinction between actual branch buildings where tellers take deposits and make loans, and dissembodied terminals that perform the same functions electronically. EFT terminals would be allowed immediately in natural market areas -- such as the nation's capital and its suburbs -- under the Carter plan.)

Modern technology, plus competition from non-banking institutions such as credit card companies and brokers, have rendered these laws "increasingly ineffective, inequitable, inefficient and anachronistic," said the report in concluding they should be updated.

Financial General Bankshares, which was "grandfathered" when the bank holding company act was passed, is currently the only banking business that already has operations in all three Washington-area jurisdictions: its First American Banks in the District, Virginia and Maryland.

But Jarvis Moody's American Security Corp. is "positioned to go," according to Moody -- in advance, he hopes, of his arch rival, Riggs National Bank, the District's largest. Several years ago American Security was forced by the Federal Reserve to sell a small bank it owned in the Virginia suburbs after Riggs complained that American Security was violating interstate banking prohibitions.

Recently, however, the chief executives of Riggs and Madison National Bank indicated they would ask regulator and stockholder approval to form holding companies.

Moody envisions a scenario where not only District banks would branch into the suburbs but some of the larger Virginia and Maryland bank holding companies with offices in the surrounding communities would also branch into the District by acquiring some of the smaller D.C. banks. Should the law change, those now in a position to do so include Suburban Bancorp. and First Virginia Banks, Inc.

But any mergers will be on a regional scale. "It will be a long time before the big New York and Chicago banks could come in," Moody said. (The fear of national takeovers prompted the Carter administration to suggest to Congress that expansion be limited initially to natural market areas, generally cities and their suburbs, or to specific percentages of market share.) Moody clearly hopes that by the time they do come, District banks will have become money-center banks themsleves, strong enough to resist takeovers.

The White House report is concerned solely with laws pertaining to banks. Yet, in the current climate of deregulation of financial institutions, it seems inconceivable that savings institutions would not enjoy the same interstate branching privileges as commercial banks. As a matter of fact, the report cites as a rationale for allowing banks to expand a proposal before the Federal Home Loan Bank Board to permit savings and loans in Washington, D.C., to branch into the suburbs, and vice versa.

Unlike banks, thrifts are not prohibited by statute from branching into other states; they need only regulatory, approval. But the District savings and loans' drive, spearheaded by Perpetual American's chairman Thomas Ownes, has been languishing at the board for two years. In the typical Washington merry-go-round, a decision on that petition was held up until the Carter administration reported whether or not it favored interstate branching for banks.

Jay Janis, who was until last month the Democratic appointee as chairman, was asked by Congress at the time of his nomination to delay any ruling on metropolitan Washington until 30 days after the report's release. Theoretically then, according to Jim Harris, who is also president of the Metropolitan Washington Savings and Loan League, Janis's successor could soon make a decision on the District thrifts' case.

Harris insists that -- with the possible exception of Kansas City, which straddles two states -- the Washington area is the most logical place in the country for a pilot interstate branching program. No new branching of D.C. thrifts into the suburbs has been approved since 1955. (Three District S&Ls have branches in Maryland which were acquired before that date.)

In addition Harris is anxious to get a decision as soon as possible because of the increasingly difficult financial condition of savings institutions. With two years of declining earnings behind them, thrifts face a third hard year that some economists project will be even worse. Janis predicted that one-third of existing thrifts would be merged out of existence by mid-decade.

The Washington area has been hit far less than the Northeast as a whole, for example, but five mergers took place last year, reducing the number of District thrifts from 16 to 11. Another is reportedly being handled by federal regulators who may have to liquidate the assets of the S&L involved. And other mergers will probably occur this year even without interstate branching.

Were the majority of Washington's surviving S&Ls given the go-ahead, Harris predicts they would seek to build branches or acquire thrifts over the District line. Washington Federal, Perpetual American and Columbia Federal have leased property in Maryland in anticipation of that day. Maryland's Savings and Loan League is understandably upset at the prospect of big-city competition. However, a few of the largest Baltimore S&Ls may try to even the score.

For political reasons, it is unlikely that a decision on thrifts will be made soon since the bank board will almost certainly have a Republican at its helm after Jan. 20, and the Reagan forces have not yet taken a position on interstate branching. Moreover, Sen. Jake Gan, the conservative Utah Republican who will be the next chairman of the powerful Senate Banking Committee, has a bias against big banks that stand to benefit the most from interstate branching. Finally, there is a great deal of opposition in the banking community to it.

Some observers have called interstate branching the next big banking battle. The passage of legislation may turn out to be as protracted as deregulation and reserve requirements were in the past. Yet, no matter how long the delay, optimists like Moody and Harris believe it will come inevitably -- and inevitably greater Washington will be first.