TOKYO (Reuters) - Japan's Norinchukin Bank, a bank for agricultural co-operatives and one of the country's largest financial institutions, is considering joining a consortium led by U.S. Cerberus Group to acquire General Motors Corp.'s finance arm GMAC, a source close to the bank said Tuesday.

The troubled U.S. auto giant has been looking to sell a controlling stake in General Motors Acceptance Corp. to a strategic partner to restore the profitable unit's credit rating to investment-grade status and get access to cheaper financing.

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Participation by Norinchukin, one of Japan's healthiest banks with assets of about ¥62 trillion ($527 billion), would be a step towards that goal. Rating agencies have said they would only separate GM's (Research) and GMAC's ratings if GMAC were sold to a buyer with a strong balance sheet.

The source declined to give details but said Norinchukin is considering the case as a possible investment option.

A spokesman at the bank declined to comment. Japanese business daily Nihon Keizai reported Tuesday that Norinchukin was expected to invest about $1 billion in GMAC.

The unlisted bank is exploring several investment ideas, including directly buying shares of GMAC or indirectly investing in the unit through an investment firm, as it plans to seek future capital gains, the newspaper said.

A private equity unit of Citigroup, the largest U.S. bank, and hedge fund Cerberus Capital Management are among bidders for GMAC, sources have said.

Norinchukin emerged from Japan's decade-long bad-debt crisis with one of the banking sector's healthiest balance sheets, and in recent years has used its strong capital base to broaden its range of investments.

Last year, it formed a retail-banking alliance with Mitsubishi UFJ Financial Group (MUFG), Japan's biggest bank, and said late last month it would pay ¥100 billion ($850.5 million) to buy preferred shares in MUFG held by the government.

Founded as a quasi-government institution in 1923 and privatized in 1959, Norinchukin's assets are about 50 percent more than those of Resona Holdings Inc., Japan's fourth-biggest listed commercial lender.

Norinchukin functions as a central bank for Japan's nationwide network of agricultural cooperatives, the main banks for the country's farmers.

GMAC provides automotive and commercial financing as well as mortgage and real-estate services. It earned $2.8 billion last year, even as GM's auto operations lost money. Analysts have said a sale of a controlling stake in GMAC could fetch GM $10 billion to $15 billion.

To raise much-needed cash, GM said Monday it would sell most of its 20.4 percent stake in Japanese compact car maker Suzuki Motor Corp. in a move that it said would raise about $2 billion.

In the past year, ratings agencies such as Standard and Poor's and Moody's have cut GM's credit ratings deeper into junk territory as it struggles with high labor costs, loss of U.S. market share and sluggish sales of sport utility vehicles -- typically its largest profit generators.

GM lost $8.6 billion in 2005 and is undergoing sweeping restructuring, including plans to slash 30,000 jobs and close a dozen North American facilities through 2008.

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