The administration proposal to grant new powers to banks and savings and loan associations would not give them the authority to underwrite corporate securities. A report in yesterday's editions may have implied that the proposal contains such a change.

The Reagan administration yesterday proposed legislation that would let banks and savings and loan associations set up separate insurance companies, real estate firms, mutual funds or offer other financial services approved by the Federal Reserve Board.

Deputy Treasury Secretary Tim McNamar said the proposal represents the most sweeping change in the banking industry in 50 years--since Congress sharply restricted the powers of banks and securities firms during the Great Depression.

Both government and industry sources said only the biggest banking companies--such as Citicorp, Chase Manhattan and BankAmerica--would have the financial strength and desire to use most of the new powers the administration proposal would grant.

"There's a lot of banks and thrift institutions who don't want any of this," said one government official.

Under the administration proposal, the new activities could not be conducted by the banks themselves but rather the parent company (called a bank holding company) or subsidiaries of the parent company.

Treasury Secretary Donald Regan said the administration wants to "insulate" banks or savings and loan associations from the new ventures both to protect the financial institutions and to make sure the new ventures compete on an equal footing with existing insurance companies, real estate companies and brokerage firms.

At a press briefing yesterday, Regan said the administration wants "any transactions between banks and their parent companies to be at arm's length so as not to give them an advantage over their competitors."

Officials of brokerage firms and other industries that have moved into the traditional banking domain in recent years have argued that banks should not be permitted to have expanded powers because their ability to take in deposits gives banks an unfair advantage in raising money.

The bill proposed yesterday is a carefully worked out compromise between the Federal Reserve Board, the nation's central bank, and the Treasury. Last year the Fed fought an administration proposal to expand banking powers because the bill would have removed any supervisory responsibility from the Fed.

The Federal Reserve also was opposed to giving banking companies the authority to underwrite corporate securities--that is, to raise capital for companies by selling newly issued stocks and bonds to the public.

Banks already have the power to act as brokers--to buy and sell stocks and bonds on behalf of their customers--but the new administration proposal seeks to change the law that prohibits bank companies from underwriting securities.

Regan said he hopes Congress will hold hearings and pass the bill this year. He said the administration thinks the proposal takes care of all objections brokers, bankers, insurance companies and others might have but said there is no reason for anyone to panic "about the train having left the station."

Senate Banking Committee Chairman Jake Garn (R-Utah) will begin hearings on the administration bill later this month.

A spokesman for Rep. Fernand St Germain (D-R.I.), chairman of the House Banking Committee, said St Germain has not made a decision on whether to hold hearings but will introduce the bill at the administration's request. President Reagan has approved the bill.

Specifically, the Treasury proposal would permit companies that own banks and savings and loan associations to:

* Underwrite and sell all forms of insurance, including life insurance, and all forms of property and casualty insurance.

* Deal in and underwrite most forms of municpal bonds, including so-called revenue bonds that have been the sole property of the brokerage industry for decades.

* Underwrite and advise mutual funds.

* Engage in real estate development, real estate investment and real estate brokerage.