MOSCOW, March 22 (Reuters) - Russia will start selling treasury bonds to households in mid-April, the first time it has borrowed directly from small retail investors, finance ministry officials said on Wednesday.
The finance ministry says the rouble-denominated bonds, known as OFZs for people, will help households to save and invest, and will be an alternative to keeping money in the bank.
But despite its pledge to ensure timely repayment, demand could be limited by memories of the Soviet Union's default on state bonds when it collapsed in 1991 and Russia's own 1998 default and devaluation.
Presenting the new bonds, the head of the state debt department at the finance ministry, Konstantin Vyshkovsky, said core purchasers were likely to be people of below average income and whose knowledge of financial markets is limited.
The minimum purchase size will be 30,000 roubles ($516.82) and holdings will be limited to a maximum 15 million roubles per person, Vyshkovsky said. The average monthly salary in Russia was 36,703 roubles ($632.29) in 2016, official data shows.
Russians will be able to buy the bonds at around 1,400 branches of Sberbank and VTB.
This year, the finance ministry plans to sell up to 30 billion roubles of the three-year bonds, which offer an interest rate of 8.5 percent with coupons payable every six months. Income from the bonds will not be taxed and the ministry plans to issue new bonds every six months.
A brochure for potential purchasers says the bonds will inspire people to save money, increase financial literacy and help diversify Russian financial markets.
Deputy finance minister Sergei Storchak said the OFZ bonds would appeal to citizens because they can rely on the state to make interest and principal payments.
But the head of the National Agency for Financial Studies, Guzelia Imaeva, cited a survey by the agency which showed 20 percent of Russians did not trust the state.
"We live in Russia and that says it all," said one respondent commented, according to Imaeva's presentation at the OFZ bonds' launch.
The survey also showed that some 55 percent of Russians do not have any savings and that only 17 percent of those who have had said they would be interested in buying OFZs for people.
As well as the 1991 and 1998 defaults, Russians experienced three waves of rouble depreciation in less than 20 years and are still grappling with a financial crisis that began in 2014 after Moscow's annexation of Crimea. Licences for many banks have also been withdrawn since 2013.
In total, the finance ministry plans to borrow 1 trillion roubles ($17.21 billion) domestically -- of which the OFZs for people are a tiny fraction -- and up to $7 billion on international markets in 2017.
Russian treasury bonds are mostly bought by professional investors and enjoy strong demand thanks to lucrative yields of more than 8 percent. The central bank's key rate is currently 10 percent, far above annual inflation of less than 5 percent. ($1 = 58.0475 roubles) (Additional reporting by Elena Orekhova and Polina Nikolskaya; Editing by Katya Golubkova and Catherine Evans)