The nation's thrift institutions have been allowed to inch closer to real competition with money market mutual funds as the Federal Home Loan Bank Board has given thrifts the go-ahead to pay near market rates on small, short-term accounts.

Instead of setting conditions as in the past, the federal regulators this time freed savings and loan associations and mutual savings banks to pay any rate they wish on amounts of less than $100,000 for less than 89 days. The only stipulations are that the new instruments not be called deposits or investment funds or money market funds. They may not be advertized as "guaranteed."

The so-called retail repurchase agreements must also carry the following statement, "This obligation is not a savings account or deposit and is not insured by the Federal Savings and Loan Insurance Corporation."

From the customer's viewpoint, the agreement resembles a deposit more than an investment. The customer agrees to leave a certain amount of money with the S&L for a certain period at a certain rate. (Some institutions impose penalties for premature withdrawal, and some do not.) At the end of that time the principal and interest are returned. There is no opportunity for capital gain or loss.

The only way in which the customer could lose his or her money is if the S&L were to fail. In such an event there would be no government insurance on these repurchase agreements.

All such funds must be invested by the thrifts in government securities.

Several S&Ls in California and Florida have already begun offering the new instruments.

The regulator's move is seen by some observers as a backdoor way of enabling thrifts to compete with money market funds.