State-run Punjab National Bank (PNB) has slashed the penalty for premature withdrawal of deposits by 50 percent to lure more depositors since medium term outlook on interest rates is uncertain.

The bank had been charging 2 per cent penalty for premature withdrawal for the last one year. The rate will be 1 percent from January 1.

KR Kamath, Chairman and Managing Director, PNB said, "We are falling in line with the market. Once you have taken a fixed deposit, if somebody prematurely withdraws, it creates problem in asset liability management. To that extent, this 1 per cent is reasonable and in tune with the market practice."

Most banks charge 1 percent penalty for premature withdrawal.

The lender, in its statement to its term-deposit customers, said that the levy of 1 percent penalty at the time of premature cancellation or part-withdrawal for all tenures and the interest payable would be the contractual rate minus 1 percent.

Despite the likelihood of a hike in Cash Reserve Ratio (CRR) and key policy rates during the fourth quarter, banks are not sure if they can take a cue in the last quarter of a financial year when credit offtake is least in the decade.

The move comes at a time when most banks are trying to address the asset-liability mismatch.

PNB is all set to introduce branchless banking by setting up kiosks in unbanked villages.