UPDATE 1-India's State Bank to review rates on Friday

(Adds quotes, HDFC, ICICI, shares)

MUMBAI, June 12 (Reuters) - India's top lender, State Bank of India (SBI.BO), will review its interest rates on Friday, its chairman said on Thursday, a day after the central bank raised its key lending rate.

Shares in banks fell 2-5 percent in early trade on concern higher rates would slow down demand for loans, and pushed the main stock index .BSESN nearly 3 percent lower.

The Reserve Bank of India (RBI) raised its repo rate late on Wednesday by 25 basis points to 8.0 percent in an unscheduled move it said was aimed at containing inflation expectations.

"There will be some rationalisation of interest rates and maybe we need to raise PLR," State Bank Chairman O.P. Bhatt told reporters at a conference, referring to the prime lending rate at which banks lend to their top customers.

Shares in government-run State Bank, whose prime lending rate is currently 12.25 percent, were down more than 3 percent at 1,270 rupees by 10:17 a.m. (0447 GMT).

Mortgage firm Housing Development Finance Corp (HDFC.BO) will take a decision on raising interest rates on home loans by the end of this month, its chairman said.

"There is certainly an upward pressure on interest rates," HDFC's Deepak Parekh told reporters at the conference.

"We will see how short-term interest rates behave, how liquidity conditions in the market are and then take a decision whether we have to raise interest rates by July 1," Parekh said.

State Bank's Bhatt said there was a slight slowdown in consumer demand for loans.

But K.V. Kamath, chief executive of India's second-largest lender, ICICI Bank (ICBK.BO), said he saw no slowdown in lending and his bank would wait to take a decision on interest rates.

ICICI shares were trading down 3.8 percent at 713.75 rupees. (Reporting by Saikat Chatterjee; Writing by Charlotte Cooper; Editing by Ranjit Gangadharan)