Citicorp, the nation's biggest and most aggressive banking institution, could receive a four-year head start over other out-of-state banks if the Maryland legislature goes along with Gov. Harry Hughes' proposal to let Citicorp establish a full-service bank in the state.

Hughes stunned the state business community and angered many bankers yesterday when he said that the state and Citicorp had reached an agreement under which Citicorp would establish a Visa and Mastercard processing facility in Hagerstown -- employing up to 1,000 persons in that depressed area. In return, if the General Assembly agrees, Citicorp would receive the right to open a full-service bank.

Citicorp, the parent company of New York's giant Citibank, has been seeking to break down every barrier to interstate banking in its quest to gather retail deposits anywhere in the country. Citicorp already operates a "limited-purpose" Citibank Maryland, N.A. in Towson, where it also runs its regional Choice bank credit card operation.

But Citibank Maryland is not allowed to advertise for deposits or set up branches. Under the legislation Hughes endorsed yesterday, Citibank Maryland would be permitted to advertise for depositors and borrowers in direct competition with other Maryland banks and set up branches anywhere in the state.

Many states and their banking industries, fearful that big New York City banks or other money center banks would quickly overwhelm the local institutions, have countered with what is called regional reciprocal banking compacts.

Those compacts permit interstate banking among states in the compact but not with other states. The backers of the compacts argue that full interstate banking is inevitable but that regional banks need time to strengthen themselves before facing competition from the nation's giant banks.

A regional interstate banking bill is pending before the Maryland legislature right now. The bill -- developed from the recommendations of a blue-ribbon commission appointed by the governor last year and backed by Hughes -- would permit banks in 13 Southeastern states and the District to buy Maryland banks if those jurisdictions permitted Maryland banks the same rights. After four years, Maryland would open its borders to banks from all states.

Two weeks ago, Virginia adopted a regional interstate banking law, and the District is considering similar legislation. Bankers said yesterday they were not sure whether Southeastern states would retaliate against Maryland if the state permits Citicorp to establish a full-service Citibank in Maryland.

Robert Tardio, chairman of Suburban Bancorp, called Hughes' about-face yesterday an "appalling example" of the "behind-the-scenes wheeling-and-dealing of Maryland politics" and said that it undoes the work of the blue-ribbon panel the governor supported.

Tardio said he opposes the notion of regional compacts and would prefer Maryland to open its doors to any and all banks across the United States. But he said it is wrong to allow Citicorp the opportunity to get a firm foothold in Maryland banking while excluding others for the time being.

Citicorp also has fought regional compacts, arguing that they are unfair restrictions on interstate commerce. The Supreme Court is expected to rule on a Citicorp challenge to a New England compact this summer.

In addition to the nation's largest bank, Citibank, Citicorp also operates a separate Citibank in upstate New York and in Maine. Maryland would be the third state in which the giant bank holding company would own a full-service commercial bank.

Citicorp also has bought big, failing savings and loan institutions in California, Illinois and Florida and has operations of some sort -- such as personal finance companies -- in nearly every state.

Citicorp held out the promise of jobs to Maryland two years ago when it persuaded the Maryland legislature -- with the acquiescence of Maryland banks -- to permit it to open a limited-service bank in addition to its Choice operations.