PNB halves penalty on premature withdrawal of deposits BS 241209
Government-owned Punjab National Bank (PNB) has halved the penalty for premature withdrawal of
deposits - a move aimed at attracting more depositors at a time when the medium-term outlook on interest
rates is uncertain. The second-largest bank in terms of business has been charging 2 per cent penalty for
premature withdrawal for the last one year. The rate will be 1 per cent from January 1.
PNB Chairman and Managing Director K R Kamath told Business Standard: "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 of the state-run banks charge 1 per cent penalty for premature withdrawal.
"Levy of 1 per cent penalty at the time of premature cancellation or part-withdrawal for all tenures and the
interest payable would be the contractual rate minus 1 per cent," the bank said in a statement to its term-
deposit customers.
Though there is widespread expectation the Reserve Bank of India (RBI) will hike policy rates and the cash
reserve ratio during the fourth quarter review of its annual policy at January-end to signal beginning of a
tighter interest regime, banks are however not certain whether they can take the cue in the last quarter of a
financial year when credit offtake is lowest in the decade.
The PNB move comes at a time when banks are trying to address their asset-liability mismatch problems
arising from lending long while borrowing short.