Is there a way lock profits in deep itm stock option which is illiquid?

I am holding a pnb 32ce which is deep itm and the cmp of pnb is around Rs. 37.10 so today I wanted to square off the position, I was not getting fair value in fact there were some seller for the price of Rs. 3.80 so I wanted to know if there is a way in deep itm option to lock the profits or to get fair value.

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You can choose to get physically settled at expiry, which I suppose you already know…

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For physical settlement I have to pay ₹32 per share right?
And also someone told me On expiry I can short pnb futures so there will be no requirement of physical settlement as I already have CE and future is also shorted and profits will be locked as I short futures. Is that true?

It will be netted off with profits I suppose @ShubhS9
Also the prices may become more normalised by then.

Yes, the shares will be delivered to you at the Strike Price.

In this scenario your obligation will be netted-off and you won’t have to give or take delivery of underlying shares. You can check this article which explains this in detail.

For netting off, If I short futures on expiry day
I have to pay any penalty also for short delivery or something like that?

No. Netted off means no delivery.