Gov. Harry Hughes and Citicorp announced tentative agreement today on a plan by which the giant New York bank would convert an abandoned manufacturing plant site near Hagerstown into a multimillion-dollar service center. In return, the bank would get the right to open branches in Maryland, which now bars most operations of out-of-state banks.

The agreement, hammered out in secrecy over the last five weeks, was hailed by business experts and legislators from economically depressed Washington County, which has 5,000 unemployed workers. Citicorp executives said at least 1,000 people would be employed at the bank's eventual credit card service center in the old Fairchild Industries Inc. plant just south of the Pennsylvania line.

But the Maryland Bankers Association, whose members' combined assets are dwarfed by Citicorp's, bitterly criticized the proposed $3.75 million sale of the Fairchild tract to the nation's largest bank holding company as an invitation for it to acquire smaller financial institutions around Maryland.

The agreement was endorsed by a host of politicians, including Senate President Melvin A. Steinberg (D-Baltimore County), who described it in an interview as a "quid pro quo."

Citicorp "would like a full-blown bank and we want to channel our economic development to where it's needed most," Steinberg said. "It would be foolish to be excessively protective of our banks . . . while strangling our economy."

The agreement, masterminded by former economic development secretary Frank De Francis, hinges on the legislature's passage of a bill allowing Citicorp, which is now restricted to a limited-service operation in Baltimore County, to establish full banking services in Maryland.

That legislation, which Steinberg said will be approved soon by the Senate before going to the House, is a companion measure to a massive interstate banking bill that would give Maryland banks four years to prepare for regional banking. After that period, out-of-state banks from the Southeast and the District of Columbia could open branches in the state or merge with or acquire Maryland banks.

Under the agreement announced today, Citicorp could start opening branch banks as early as this summer, with the firm's Baltimore County office a prime candidate as the site for one, according to Ira S. Rimmerman, chairman of the Citicorp division that would build the credit card center near Hagerstown.

The agreement also would require Citicorp to wait at least four years before merging with a Maryland bank, Rimmerman and Hughes said.

"They are willing to abide by the four-year limitation," Hughes said. Until the period ends, "they will just be a Maryland bank doing business here and will not be involved in mergers [or] acquisitions."

However, assurances from the governor and Citicorp did little to mollify the bankers association, whose spokesman, William Weaver, said the agreement will allow Citicorp quickly to "undertake just about anything it wants."

"It singles out the largest bank in the country and says their [full-service banking] starts July 1 and everybody else's starts four years from now," Weaver said. "The state's saying, 'C'mon in and do whatever you want.' "

With combined assets of roughly $20 billion, nearly all of Maryland's 90 banks are vulnerable to takeover by Citicorp, which has over $140 billion in assets, once the bank opens full-service operations, Weaver said.

But Maryland's larger banks have few qualms about the Citicorp agreement, spokesmen said today. For instance, First National Bank in Maryland, whose $3 billion to $4 billion in assets make it the second largest in the state, "is fully prepared for regional banking," said Bruce C. Bereano, the bank's lobbyist here.

"This deal wouldn't bother us at all," Bereano added.

Del. Paul Muldowney, a Democrat in whose district the center would be built, acknowledged some of the criticism about the agreement, saying, "Everybody's saying it's a sweetheart deal for Citicorp."

But, Muldowney added, the agreement "is the best thing that has ever happened for the people of Washington County" in the 19 years he has lived there.

The deal was also a coup for the Hughes administration, for whom the abandoned manufacturing plant had come to symbolize the state's uneven record of luring and retaining large employers in Maryland.

Fairchild, one of the largest defense contractors in the nation, abandoned its 56-acre site north of Hagerstown in 1983, moving its operations to Northern Virginia and giving the state its 1.1 million-square-foot complex.

Since Fairchild's departure, Maryland has spent nearly $1 million to maintain the complex, which Citicorp plans to raze to make way for construction of one building of at least 100,000 square feet.

A Hagerstown service center employing senior management officers and hundreds of clerical workers would be a companion to similar Citicorp facilities in South Dakota and Nevada.

Although the stated price for the Fairchild site is $3.75 million, the agreement between Maryland and Citicorp allows the bank to pay only $1 million cash if it hires at least 750 persons in three years.