A Complete Guide to Currency Laws and Offenses in Nepal

Currency law in Nepal governs how the nation’s money is issued, regulated, and managed. The central legal foundation for this system is the Nepal Rastra Bank Act, 2002, which provides the framework for monetary regulation. Under this Act, Nepal Rastra Bank (NRB), the country’s central bank, holds exclusive authority to issue currency, regulate foreign exchange, and maintain the stability of the financial system.

The Nepalese Rupee (NPR) serves as the official currency. Its issuance is guided by monetary policies aimed at controlling inflation, ensuring sufficient liquidity in the economy, and supporting overall economic development. Foreign exchange transactions are regulated by the Foreign Exchange (Regulation) Act, 1962, which is designed to curb illegal currency dealings and prevent money laundering.

Currency regulations in Nepal also play an important role in safeguarding the public from counterfeit money, facilitating international trade, and preserving exchange rate stability. This is particularly significant in relation to the Indian Rupee, with which the NPR has a fixed exchange rate. As financial practices evolve, the government periodically revises currency-related laws to respond to economic changes, rising digital transactions, and advancements in financial technology. NRB also oversees matters relating to cryptocurrencies, which remain unrecognized and illegal within Nepal.

Section 257(2a) of the National Penal Code, 2074 defines “currency” broadly to include currency notes, postal orders, money orders, cheques, drafts, traveler’s cheques, letters of credit, bills of exchange, bonds, credit cards, and other comparable financial instruments that NRB may specify through public notice. The Penal Code outlines several offenses related to currency, each with corresponding penalties.

Major currency-related offenses under the National Penal Code, 2074:

1. Counterfeiting currency (Sec. 256):

Counterfeit currency refers to any currency unlawfully forged to resemble legal tender issued by Nepal, NRB, or a foreign authority. It is illegal to counterfeit or attempt to counterfeit any currency.

Punishment: Imprisonment from five to ten years and a fine between fifty thousand and one lakh rupees.

2. Using counterfeit currency (Sec. 257):

It is prohibited to purchase, sell, use, import, export, or transact with counterfeit currency with the intention of using it as genuine, or even to attempt such acts.

Punishment: Imprisonment up to seven years and a fine up to seventy thousand rupees.

3. Making or possessing tools for counterfeiting (Sec. 258):

Producing, repairing, buying, selling, or possessing equipment intended for counterfeiting currency is unlawful if the person knows or has reason to believe the tools will be used for forgery.

Punishment: Imprisonment up to seven years and a fine up to seventy thousand rupees.

4. Producing currency against prescribed standards (Sec. 259):

Authorized individuals involved in currency production must follow legal standards. Making currency in violation of rules, exceeding set limits, or deviating from specifications for personal or others’ benefit is prohibited.

Punishment: Imprisonment up to seven years and a fine up to seventy thousand rupees.

5. Taking currency-making instruments off-site (Sec. 260):

Removing any machinery or tools used for currency production from official premises without legal authorization is forbidden.

Punishment: Imprisonment up to five years and a fine up to fifty thousand rupees.

6. Altering or reducing the weight of metallic currency (Sec. 261):

Deliberately reducing the weight of coins, altering their metallic composition, or modifying currency to resemble another type with the intent to use it as genuine is illegal.

Punishment: Imprisonment up to five years and a fine up to fifty thousand rupees.

7. Using banned currency (Sec. 262):

It is unlawful to circulate, exchange, or possess currency whose use has been outlawed by the competent authority.

Punishment: Imprisonment up to one year, a fine up to ten thousand rupees, or both. The prohibited currency is also subject to forfeiture.

8. Burning, tearing, melting, or writing on currency (Sec. 263):

Without authorization, no one may destroy banknotes or coins, or alter them such that they cannot be used. Writing on or marking banknotes is also prohibited.

Punishment: Imprisonment up to three months and a fine up to five thousand rupees.

9. Misusing damaged banknotes (Sec. 264):

Any person assigned to dispose of torn or unfit banknotes must not misuse, hide, or distribute them for personal gain. These notes must be handled strictly according to the law.

Punishment: Imprisonment up to three years and a fine up to thirty thousand rupees.

10. Forfeiture (Sec. 264):

All tools, machines, materials, and currency used in committing currency-related offenses are subject to confiscation.

Procedural provisions:

• These offenses are treated as state cases.
• The statute of limitation is one year from the date when the offense becomes known.

Overall, Nepal’s currency laws aim to preserve monetary stability, regulate the issuance and circulation of the Nepalese Rupee, and prevent illicit financial activities. Through the Nepal Rastra Bank Act, 2002 and the Foreign Exchange (Regulation) Act, 1962, the government has created a comprehensive structure for currency management and foreign exchange control. The National Penal Code, 2074 further reinforces these protections by imposing strong legal consequences for counterfeiting, misuse, and other unlawful actions involving currency. By continually updating and enforcing these rules, Nepal works to maintain economic integrity, protect consumers, and align with international financial standards, thereby strengthening trust in the national monetary system.