JERUSALEM, July 13 (Reuters) - Israeli Prime Minister Benjamin Netanyahu on Wednesday defended a contentious new law which could lead to financial penalties for anyone in Israel advocating a boycott of West Bank settlements.

Critics of the law, carried 47 to 38 in the 120-seat parliament on Monday, have called it anti-democratic and a blow to free speech, and civil rights groups have announced appeals to the Supreme Court to try to overturn it.

Make no mistake, I authorized the bill, if I had not authorized it, it would not have got here and it would not have passed, Netanyahu told parliament in a speech.

Before Monday's vote, parliament speaker Reuven Rivlin said he had appealed unsuccessfully to Netanyahu to seek a rewording of the legislation after the assembly's legal adviser issued an opinion that it impinges on political expression in Israel.

Netanyahu, who did not participate in the vote, told lawmakers he was against boycotts on the whole state of Israel and I am against boycotts on groups of Israeli citizens.

Supporters of the law said its reference to boycotts based on geography was aimed at countering calls in Israel and abroad for cultural and economic boycotts against settlements in the West Bank, occupied land Palestinians want for a state.

The issue first grabbed headlines in Israel several months ago after leading Israeli performers said they would not appear at a theater in Ariel, one of the biggest settlements Israel has built in the West Bank.

The Association of Civil Rights in Israel (ACRI), one of a number of groups that oppose of the law, said that regardless of one's position on the question of promoting or opposing a boycott, it is unquestionably a protected form of free speech.

The left-wing Haaretz newspaper said before Monday's vote that lawmakers in favor of the legislation were supporting the gagging of protest as part of an ongoing effort to liquidate democracy.

Palestinian negotiator Saeb Erekat said in a statement that making the boycott of Israeli settlement products punishable by law will send a clear message that Israel is not committed to a two-state solution.

Some 300,000 Israelis live in about 100 settlements in the West Bank, home to 2.5 million Palestinians. Most world powers deem the settlements illegal.      

(Writing by Ori Lewis; Editing by Jon Hemming)