February 16, 1983

Banks are keeping interest rates high in part to protect themselves from losses on problem loans, Treasury Secretary Donald T. Regan told a Senate panel. The banking industry denied Mr. Regan's assertion. The Secretary also cited uncertainty in the financial community about Federal Reserve policies and about projected Treasury borrowings to meet large budget deficits. (Page A1.) New car sales by the Big Three auto makers fell 5.1 percent in the first 10 days of February, the first year-to-year decline since early last autumn. Chrysler's sales rose during the period, by 2.8 percent, but G.M.'s dropped 5.2 percent and Ford's, 8.6 percent. Analysts were not overly disappointed by the results, saying that the industry is in the early stages of an upturn. (D1.)

The pre-eminence of Japanese companies as the world's masters at making small cars was emphasized this week as never before by the decision of the General Motors Corporation to seek assistance from the Toyota Motor Corporation in producing a new subcompact. Not only will the car, to be assembled at a G.M. plant in Fremont, Calif., be a Toyota design, but it will have a Toyota engine and transmission and the entire 50-50 operation will be under the supervision of a Toyota executive. G.M.'s need for help from a company that its executives hardly deigned to notice not many years ago raises the question of why the world's largest manufacturing corporation, once studied as the model of scientific management, cannot produce a high-quality small car on its own. ''The answer is, they can, but they would have to price it at $10,000,'' said Martin L. Anderson, director of the Future of the Automobile program at the Massachusetts Institute of Technology. The key advantage enjoyed by Japanese manufacturers is an efficiency of production that permits Toyota, for example, to sell its subcompact Tercel in the United States for about $5,000.

A Business People item in Business Day Monday gave an incorrect first name for the new president of Bossard Consultants. He is John D. Rich.

A picture caption yesterday accompanying a dispatch from Gauhati, India, incorrectly identified the leader of the opposition Bharatiya Janata Party. He is Atal Bihari Vajpayee.

New York City is in better shape than usual at this stage of its budget-building - assuming Mayor Koch goes through with his contingency program of layoffs, service cuts and tax increases -State Comptroller Edward V. Regan said yesterday. The gap between income and spending in the fiscal year that starts July 1 seems ''manageable,'' he said, and ''is much smaller than the gaps usually faced by the city four to five months before the next fiscal year.'' The gap can be reduced even further, he said, if the Legislature approves changes in state aid proposed by Governor Cuomo. The Governor wants the state to start taking over local Medicaid costs and to change its formula for school aid.