The American Bankers Association filed suit yesterday in U.S. District Court to try to stop savings and loan associations from offering interest-on-checking accounts to government organizations. These entities now have some $18 billion dollars on deposit in non-interest-bearing accounts at commercial banks.

Judge Harold Greene is expected to rule today on an ABA request for a temporary restraining order against the Federal Home Loan Bank Board and the Federal Reserve. Last week these regulators issued rules giving thrift institutions an effective competitive advantage over banks in the sale of interest-bearing negotiable orders of withdrawal, better known as NOW accounts.

The Fed limited eligibility for NOW accounts at banks to tax-exempt nonprofit organizations operated primarily for religious, philanthropic, charitable or educational purposes. The bank board decided to extend the eligibility so that nonexempt organizations like state and municipal funds and political action committees also can receive interest-on-checking accounts established at savings and loan associations.

In its suit, the ABA seeks to prevent that regulation from going into effect today and thereby causing its members -- commercial banks -- what they say would be "great, lasting and irreparable injury." The trade association states in its brief that "common sense dictates" that eligible organizations will put their funds in interest-bearing accounts at thrifts, "all else being equal."

However, the Homeowners' Loan Act limits the lending powers of federally chartered savings and loans to mortgages and consumer loans plus loans on the security of savings accounts, according to a bank board attorney. So how many of these government organizations would want to make deposits in institutions that cannot lend to them is uncertain.

The ABA seeks a temporary injunction pending a full court review of the legality of the bank board regulation. It claims that letting it go into effect now, if it is later found invalid, would only result in "defeated expectations, ill will and financial losses on all sides." The basis for the ABA's contention that the rule is invalid is that it violates federal legislation aimed at enabling all financial institutions to compete on an even playing field.