The District of Columbia government, ending its historic ties with the U.S. Treasury, will start paying its bills and its employes as early as next month with checks drawn on the city's private banks.

The shift to commercial banking, announced by the city yesterday, was authorized by Congress in 1973 as part of the city's home rule charter. D.C. Treasurer Carolyn Smith said it would add an estimated $1.5 billion a year to the money that passes through the city's banking system.

The city's two money-handling agencies, the Department of Finance and Revenue and the Office of Budget and Management Systems, said agreements had been reached with five banks to serve as the city's disbursing and collection agents.

Accounts will be established with the American Security Bank, the National Savings & Trust Co., the Industrial Bank of Washington, the United National Bank and the Riggs National Bank, the announcement said.

Only enough money will be kept in the accounts to pay outstanding checks and meet other obligations to the banks, treasurer Smith said. Other funds are invested in notes or other accounts on which interest is paid.

For the city's employes, pensioners and creditors, the biggest apparent change will be in the color and weight of the checks. The familiar stiff U.S. Treasury checks of pale green will be replaced by checks on thinner paper in a variety of colors.

A U.S. Treasury official said the D.C. government has used the Treasury as its banker for so long that there are no accessible records indicating when the arrangement began. It had its roots in the years when the D.C. government was effectively, if not legally, an arm of the federal government.

The five banks were selected under provisions of the D.C. Depository Act, passed by the City Council to carry out the shift from the Treasury permitted by the home rule charter.

The Depository Act required that the city give some of its banking business to the two banks that have the best records of making inner-city housing and small-business loans and hiring miorities and women for decision-making jobs.

Those two baks, both minority-owned, are the Industrial Bank and United National.

The rest of the accounts were placed in banks that submitted bids to provide the services for the lowest costs. Before bidding, however, those banks had to meet minimum standards on their loans and hiring practices.

The Finance and Revenue Department said it expects to finish negotiating the contracts within the next two weeks, and a total of 10 accounts would be opened at the five banks between mid-April and June 30.

Eileen Winterble, of the budget office, said the city hopes to start issuing its first checks under the new system during May.

Here is how the accounts will be distributed:

American Security Bank will handle the city's so-called "custodial" account into which all deposits will be made and from which funds will be transfered to all other accounts; payrolls for police officers, firefighters, wage board (blue collar) employes and some other employes, and payments to vendors.

National Savings and Trust Co. will handle payroll checks for most general schedule (GS-rated) employes; public assistance payments, and low-volume checks, such as replacements for lost checks.

Industrial Bank of Washington will handle the teachers' payroll and benefit payments to retired police, firefighters and teachers and their survivors.

Industrial Bank of Washington will tax refunds.

Riggs Naional Bank will process and deposit real estate tax payments sent to the District government by mail, and transfer them to American Security.

The five banks will share annual fees totaling an estimated $467,000 for providing the services to the city. Of that, $153,000 will go to the two minority-owned institutions.

The District will pay for the setvices by maintaning so-called "compensating balances" in their checking accounts. These are specified sums larger than the amount of money actually needed to pay outstanding checks.

D.C. treasurer Smith said the new banking arrangement will help the city manage its flow of cash. In the U.S. Treasury, the city must have the money on deposit before it can draw its checks. In the banks, the city can use the so-called "float," drawing checks in advance and shifting cash into the accounts before the checks are presented for payment.