Nepal Rastra Bank (NRB) closed the sales of Citizen Savings Bonds on Sunday, two days before schedule, as the issue worth Rs5 billion was oversubscribed.

Only individuals can buy the bonds which pay an interest of 8 percent per annum. The interest payments are made every six months, said NRB, which issued the bonds on behalf of the government. The bonds mature in five years.

“This is the first time that all the Citizen Savings Bonds have been subscribed,” said Min Bahadur Shrestha, chief of the public debt management department of NRB. “We had to close sales before the deadline because of oversubscription.”

According to him, bonds worth Rs750 million were subscribed on Sunday alone. The growing interest in Citizen Savings Bonds is shown by the fact that NRB issued additional bonds in the same lot after the initial issue was oversubscribed.

NRB had issued Rs3 billion worth of bonds on March 20. They were already oversubscribed by March 24, well ahead of the March 29 deadline. The central bank then issued another Rs2 billion worth of bonds in the same lot even though it had planned to put them on sale only after mid-April.

Shrestha attribute the rush to excess liquidity in the banking sector and low interest rates on deposits and a more effective bond publicity campaign carried out by NRB this year.

The interest rates offered by commercial banks have dropped to as low as 3-4 percent on fixed deposits. The interest rate on savings deposits is 2 percent.

According to Shrestha, the central bank had provided training to sales agents in the Kathmandu Valley and elsewhere in the country to publicize the bond issue.

“In the past, people had to come to NRB to subscribe for these bonds, but now accessibility has expanded as people can buy them through agents too,” he said. In the last fiscal year, Rs2.33 billion worth of Citizen Savings Bonds were sold compared to the issue valued at Rs2.5 billion.

NRB used to convert unsubscribed Citizen Savings Bonds into Development Bonds which offer a lower rate of interest. “Although the government has to pay more interest on such bonds, they are important to develop the culture of utilizing public resources for development,” said Shrestha.