Mumbai: A rebalancing of credit portfolio for channeling advances to productive sectors of the economy would increase real estate and personal loans, heads of several banks attending a meeting called by finance minister P Chidambaram said.

Loan rates may harden for the commercial real estate sector, P P Mallya, chairman, Vijaya Bank, said on the sidelines of the meeting to take stock of the situation arising out of RBI's decision to hike the repo rate by 0.25 per cent in its busy season credit policy.

Chidambaram asked banks to gear up to finance an Indian economy that would be the third largest in the world in a few years.

"There is only 50 per cent of India's GDP which is financed by institutional credit. My concern is about the remaining 50 per cent," he said. "My concern is also about the growing GDP and how we will be able to finance it," Chidambaram added.

"Real estate carries higher risks. To the extent that credit will be channelised to preferred areas, the rates for real estate may rise little bit," P K Gupta, chairman, United Bank of India, said. There was a possibility of a quarter-er cent rise in retail sector loans, another bank chief said.

Chairman of IDBI and IBA V P Shetty said there is pressure on deposit rates. "It is a clear case of asset-liability mismatch," he said adding credit growth has been galloping at 30 per cent for three consecutive years. While credit growth has been really good, deposits have been growing at just 20 per cent, he said.

SBI chairman O P Bhatt, however, said there was no immediate pressure on deposit and lending rates. "Our net interest margin is at 3.2 per cent and we expect it to remain at that level," he said.