Citicorp Chairman John S. Reed yesterday said the broad outlines of Treasury Secretary James A. Baker III's plan to boost lending to developing countries makes sense because it attempts to deal with the long-term money needs of the world's debtor nations.

But Reed cautioned that the Baker initiative was just a first proposal and undoubtedly would go through several refinements before it is formally put in place.

In an address to the annual meetings of the World Bank and the International Monetary Fund last month, Baker proposed a three-part plan in which:

*Major banks would boost their lending to middle-income debtor countries, most of them in Latin America, by $20 billion during the next three years.

*Important multinational development agencies, the World Bank and the Inter-American Development Bank, would increase their lending by $9 billion.

*Debtor nations themselves would make changes in their economic policies to make them more receptive to foreign investment and to encourage private sector development.

Reed, at a luncheon meeting with Washington Post editors and reporters, said that rapidly developing countries cannot be expected to go on for a long period of time without access to foreign savings. He said the Baker intiative is an attempt to restore a long-term flow of funds to the debtor nations.

As a whole, debtor nations have been sending more money abroad than they have been receiving for the last few years. He said they can survive that situation for a few years, but not forever. They need foreign funds to develop.

But Reed, who took over as chairman of the nation's biggest bank company 14 months ago, said that banks will not send good money after bad. Banks already have lent more money to many of these countries than is good either for the banks or the debtor nations themselves. Nevertheless, he said, banks will be willing to increase their exposure to countries that are running good economic policies.

He also said that banks will be careful to lend to projects that are likely to produce foreign earnings, chiefly in dollars, that can be used to repay the loans. One of the many sources of the so-called Latin American debt crisis is that countries used their foreign borrowings in projects and activities that did not generate dollars.

Reed also said that it is unlikely there would be any major changes in the banking environment in the District of Columbia if Citicorp or other major bank companies were allowed to set up operations in the city. Citicorp, whose key subsidiary is New York's Citibank, is looking for a toehold in the District, as it is in most states. But he said banking customers do not change their habits overnight.

He also said that the loan portfolios of most banks are full of problem assets, a reflection of problems in many sectors of the economy. He said many sectors of the economy remain in serious problems, despite nearly three years of economic recovery -- including the shipping industry and nearly all public utilities with construction under way.

He said the problem loans remaining on bank books are not the result of bad lending practices; those sorts of loans were written off years ago, he said. Instead, Reed said, they are loans to well-run businesses that are having troubles prospering in the current economic and regulatory environments.

He said that because of the uncertainties in the economic climate, Citicorp has been steadily building its capital base to prepare itself for any further erosion in the global economic situation. Capital consists mainly of shareholder investment in a company and profits the company retains rather than paying out to stockholders. It is the final bulwark a bank has against loan losses.