A gunman shot dead four people execution-style in a bank in Israel on Monday, May 20 after being refused an overdraft and cash from its automatic teller machine, Reuters said.

The assailant, identified by media reports as a former paramilitary border policeman, killed himself after police raided the Bank Hapoalim branch in the southern city of Beersheba to free his hostages.

"It appears that we are talking about a lone individual who came to the bank in the morning hours, sought cover for a debt, a loan, and did not get it," Internal Security Minister Yitzhak Aharonovitch said on Army Radio.

After finding that he could also not draw cash from the automatic dispenser, the man "came back with a pistol and shot dead four people ... bank employees and customers", Aharonovitch said.

Police initially described the incident as a robbery but later said the assailant appeared to have known his victims and shot them without demanding any money.

Witnesses quoted by Israeli media said the gunman first killed the bank guard and then shot three people who were lying on the floor, checking the pulse of one of them to make sure he was dead.

Prime Minister Benjamin Netanyahu called the incident a "great tragedy" for Israel, where soldiers carrying weapons are a common sight but gun laws are strict for private individuals.