Oil billionaire Gordon Getty yesterday threatened to sue federal regulators if the government does not suspend its decision to sell troubled National Permanent Bank to banking giant Citicorp.

Getty's lawyers sent a letter to the Federal Home Loan Bank Board claiming the agency misread federal law during the recent bidding process for National Permanent, the District's second-largest thrift. The letter, asking for a response to the request by noon today, said Getty would go to court if the process is not reopened to let him raise the price of his offer.

The bank board, the federal agency that regulates and insures the nation's thrifts, put National Permanent up for sale in January to try to find a buyer who could restore financial health to the troubled institution. At the end of 1985, the thrift's deposits and other obligations exceeded assets by $80 million.

On Monday, the board awarded National Permanent to Citicorp, the nation's largest bank company.

According to Getty and to previous bank board statements, federal law requires the bank board to give preference to bidders who demand the least amount of federal assistance. It also requires the board to preserve the distinction between S&Ls and banks whenever possible and to give preference to local bidders.

Getty, who lives in San Francisco, argues that individual bidders such as himself are, for bidding purposes, considered to be local, and thus must be given preference over out-of-state institutions such as Citicorp. Getty is oil tycoon J. Paul Getty's son.

Getty claims that the cost of his bid to the government falls within 15 percent or $15 million of Citicorp's bid. Federal law, Getty argues, requires that any local bidder whose offer falls within that range be given a chance to re-bid and raise the value of the offer.

Getty further claims that if his new offer exceeds Citicorp's, by law he must be awarded the right to acquire National Permanent. The only exception would be if the bank board had some strong objection to Getty, but Getty lawyers say the board has indicated it has no such objection.

The threatened lawsuit is the latest salvo in the rivalry of Citicorp and Getty, which some bankers are jokingly calling a battle of titans. The well-heeled pair, whose pockets are among the deepest anywhere, are vying for National Permanent because the sick thrift would provide, at a bargain price, a toehold in one of the nation's fastest-growing financial-service markets.

A protracted legal battle could be awkward for the bank board, which has been the target of criticism in recent years as thrifts continue to fail in record numbers. Several members of the local banking community said it certainly would raise concern about leaving National Permanent in limbo.

Getty is using the local firm of Royer, Shacknai & Mehle to wage his fight. The letter sent yesterday to bank board Chairman Edwin J. Gray was signed by law partner Roger W. Mehle, who as assistant secretary of the Treasury for domestic finance in 1981 and 1982, helped craft the federal law that governs emergency acquisitions of troubled banks and thrifts.

Citicorp had no comment yesterday. National Permanent referred all calls to the bank board. The board said it would be inappropriate to comment "at this time," but bank industry sources said the agency's lawyers are taking Getty's legal arguments seriously.

If the bank board does not suspend its decision and reopen the bidding process, Getty's lawyers said they then will ask the U.S. Court of Appeals for the District of Columbia to overturn the bank board's decision.

They said they also will ask the court to freeze any action on National Permanent until the court decides the case.

If the court rules in favor of the bank board, Getty's only legal recourse will be to ask the U.S. Supreme Court to review the case, his lawyers said.