Chevy Chase Savings and Loan, the largest of the 102 Maryland thrift associations that were privately insured when a crisis struck the industry this month, won full federal insurance protection last night.

The announcement of coverage by the Federal Savings and Loan Insurance Corp. (FSLIC) means that the Chevy Chase association's 25 branches may return to normal operation today free of the restriction that limited withdrawals to $1,000 a month on each account.

Chevy Chase, the second largest S&L in the Washington area, has assets of $2.3 billion, representing about one-fourth of the assets of all the affected associations.

The withdrawal restriction was imposed by Maryland Gov. Harry Hughes on all the state's privately insured thrifts on May 14 after allegations of mismanagement and insider loans at Old Court Savings and Loan in Baltimore.

Last night's announcement by Chevy Chase President B. Francis Saul II of the new federal coverage capped a day of activity that included word that Hughes was lifting restrictions on 17 additional small S&Ls in the Baltimore area, bringing to 34 the total number of thrifts released from his emergency order.

"We are further along the road to normal business operations," said Hughes. The 17 he released from his order yesterday joined 16 he released Tuesday, largely because of recommendations from federal auditors.

There were no indications yesterday of new runs on any of the state's S&Ls.

Saul celebrated the 7:30 p.m. announcement of approval from the Federal Home Loan Bank Board by placing the gold-and-black FSLIC seal in the window of the association's headquarters at 8401 Connecticut Ave., Chevy Chase, to the applause of about 20 employes.

FSLIC coverage means each Chevy Chase account is now insured up to $100,000. Coming under the federal insurance protection could result in "marginal adjustments" in interest rates paid on its accounts, Saul said. "Some could be lower, some could be higher," he said.

The announcement also covers accounts at Government Services S&L, which Chevy Chase acquired on April 1.

Chevy Chase began the process of seeking federal insurance last August, Saul said, but its application was speeded up after the crisis began unfolding this month. Saul said the association had put up "a very substantial amount of capital, in cash," to meet the requirement that FSLIC-insured institutions have 5 percent more in assets than deposits.

Terms of legislation approved by an emergency session of the Maryland General Assembly last Friday allowed members of the old Maryland Savings-Share Insurance Corp. (MSSIC) to draw out money they had placed in MSSIC to help them qualify for federal insurance coverage. Chevy Chase's share of that account was $38 million.

The Assembly is now studying proposals to allow out-of-state financial institutions to take over ailing Maryland S&Ls. Such a law was enacted in Ohio after a mid-March savings and loan crisis there, and yesterday three small S&Ls in that state that had been closed were purchased by the giant California institution, Home Savings of America.

One question before the Maryland Assembly is who should conduct the state's investigation of the Old Court Savings and Loan Association. Senate President Melvin L. Steinberg proposed yesterday that it be conducted by the state prosecutor rather than by Maryland Attorney General Stephen H. Sachs in order to "remove any specter of political overtones" from the probe.

Steinberg's suggestion that the investigation be directed by state prosecutor Stephen Montanarelli added considerable weight to a movement within the legislature to deny Democrat Sachs the opportunity to boost his 1986 gubernatorial fortunes through a highly visible investigation of possible savings and loan industry abuses.

Two legislative committees are to hold a hearing today in Annapolis on proposals to grant the attorney general additional powers to conduct the investigation. One, sponsored by the Hughes administration, would give Sachs the power to give witnesses immunity from prosecution in exchange for their testimony before grand juries. The full Assembly is scheduled to take up the issue on Tuesday.

Sachs has already begun an investigation into possible criminal misconduct at Old Court, where a run on deposits that began May 9 triggered a statewide savings and loan crisis, resulting in the imposition of strict withdrawal limits.

Sachs, told of Steinberg's suggestion, said, "The governor has asked me to conduct this investigation. We've been at it aggressively for over three weeks now. Unless the governor asks me to stop, we are going to continue to conduct it as I have always conducted investigations for two decades now: impartially, unpolitically and relentlessly, no matter where the leads take us."

Hughes responded to Steinberg's call for an investigation by the office of the state prosecutor, saying, "I have the utmost confidence in the attorney general. He requested and I gave authorization for him to investigate the Old Court situation. He has the staff and experience and other necessary qualifications to conduct a thorough and impartial investigation, as the public expects."

Hughes spokesman Lou Panos said the governor lifted his withdrawal limitation on selected S&Ls largely because federal auditors found "strong net worth, management and record keeping."

The largest of the associations cleared by Hughes is the 21-branch Commercial Credit Savings and Loan. Sheila Ruof, spokeswoman for that thrift, said yesterday, "We've never experienced a run," although customers were inconvenienced by the withdrawal restrictions.

Ruof said its restrictions were lifted because Commercial Credit is owned by Control Data, which has more than $7 billion in assets.

Wilson Walters, a retired prison warden, said he decided to do business with Commercial two years ago because they offered good rates on money market certificates. Walters said he thought about withdrawing his money when the crisis began, but did not panic when Hughes imposed the $1,000 withdrawal limit because he had no immediate need to withdraw large sums. Now that the worst is over, Walters said, he is still considering moving his funds to a commercial bank with federal backing.

Many of the other S&Ls listed on the governor's exempt list are "one nighters" -- tiny neighborhood associations that open one night a week.

Theodore Denick, president of Atlas Savings and Loan in Baltimore, one such small association, said the run on Old Court had no effect on his organization, which, with less than $300,000 in assets, is automatically covered by the new Maryland Deposit Insurance Fund.

Some of the money withdrawn from the privately insured S&Ls ended up at federally insured institutions, such as Loyola Federal S&L, where Marshall W. Moore, senior vice president, said deposits were unusually heavy in recent weeks.