CURRENCY OF NEPAL AND THE RELATED RULES

MONEY, BANKNOTE AND COINS

Money is the underlying basis upon which whole economy of the entire nation depends upon. The small poke can make the revolutionary change in the economy of country. So, the exclusive power relating to money is given to the central bank of the country.

People often thinks that "The government can issue as much money as it wants". 

Do you have the same level of perceptions ?.

Today, i am writing the blog to make you aware about how the money, banknotes and coins operates in Nepal. I have tried to easily explain the concepts.

The central bank of Nepal is Nepal Rastra Bank. 

(For more detail about the central bank, objectives, function, duties and powers of Nepal Rastra Bank- please refer to the above link )


First lets have an overview about monetary unit, banknotes and coins. 

Monetary Unit: 

The 'Rupee' also prounced as 'Rupaiyaan' - is the monetary unit of Nepal. It is a legal tender made within the Nepal. The Government of Nepal provides guarantee for such Rupee.

Banknotes and Coins: 

The Nepal Rastra Bank has monopoly over the issue of banknotes and coins in the country. Such notes and coins is legal tenders made within the Nepal.

Unlike other central banks, Nepal Rastra Bank issues notes, only against:

• The security and 

• The liability 

- of such issued notes . This issue shall be equal to the value of property kept as security.

Practically, 

At least 50% of the property is kept as security which shall be in the form of following:

• Gold 

• Silver 

• Foreign currency 

• Foreign securities 

• Foreign bills of exchange 

However, the remaining percentage is in the form of following:

• Coins 

• Debt Bond (issued by Government of Nepal) 

• Promissory note (payable in Nepal) 

• Bills of exchange (payable in Nepal) 

Such Promissiory Note or Bill of Exchange is payable within specified period (not exceeding 18 months) from the date of repayment by bank.
However, 

with the permission taken by the goverment of Nepal, the ratio of property kept as a security must be at least 40% of the property in the form of following: 

• Gold 

• Silver 

• Foreign currency 

• Foreign securities 

• Foreign bills of exchange 

Similarly, the remaining percentage is in the form of following:

• Coins 

• Debt Bond (issued by Government of Nepal) 

• Promissory note (payable in Nepal) 

• Bills of exchange (payable in Nepal) 

Such Promissiory Note or Bill of Exchange is payable within specified period (not exceeding 18 months) from the date of repayment by bank.


NOTE:

For this purpose, the valuation of property is done in the following manner mentioned as follows:-

• The price of Gold - at the rate fixed by Government of Nepal, on the recommendation of the Board. 

• The price of Silver - at the rate deemed appropriate by the Board. 

• The price of Foreign Currencies - at the exchange rate fixed by the Bank. 

• The price of Debt Bond issued by Government of Nepal - at the rate deemed appropriate by the Board on the basis of market rates. 

• The price of Foreign Securities -at the rate deemed appropriate by the Board on the basis of market rates. 

• The price of Bills of Exchange - at the rate deemed appropriate by the Board on the basis of market rates. 

• The price of Coins - at the rate of face value. 

The Present highest currency denomination of paper money in Nepal is Rupee of thousand and the present highest currency denomination of coin in Nepal is Rupee of ten.

However, the central bank of Nepal has the authority of issuing the bank notes of various denominations whenever it thinks fit. While issuing banknotes in this way, the figures appearing in the notes, size and denominations shall be as approved by Government of Nepal. 

The Board of the Nepal Rastra Bank decides about the -

• Figures 

• Internal security arrangements 

• Materials to be used for printing banknotes and other materials. 

Similarly, the government of Nepal consults the Board of the bank in order to declare that - banknote of any denomination will cease to be legal tender in any place other than, the prescribed place or office having published a notification in the Nepal Gazette.


NOTE:

It is to be noted that the Nepal Rastra Bank don't reissue the notes, which are :

• Torn 

• Defaced or 

• Excessively soiled. 

Similarly, with the approval of Government of Nepal, the bank can do following activities:

• Mint and bring into circulation the coins of whatever metal or mixture of metals . 

• Bring into circulation having minted them in Mint on specials occasions. 

• If it deems appropriate, then get such coins minted in any foreign Mint. 

However, if the coins gets minted once with the approval of the government and the same is to be re-minted again , in such case no approval is required again. Similarly, the Bank may, with the approval of Government of Nepal, mint the coins which are sent for minting by a foreign government.

Following points are to be generally understood that :

Banknotes and Coins are Acceptable to all:


The banknotes and coins are acceptable to all up to the extent of the amount of face value for repayment of all types of public or private debts within the Kingdom of Nepal.

Measurement, Weights and Size of Coins:
The face value, measurement, weight, size and other features of the coins is issued by Nepal Rastra Bank under the Nepal Rastra Bank Act which is prescribed by the Board.

Issuance of Currency and Security:

All the matters relating to:

• Printing of banknotes 

• Minting coins 

• Providing security to the notes issued banknotes and coins. 

• Keeping them in appropriate manner 

• The matter of safe keeping or destroying the old banknotes or coins which are not in circulation 

• Plate and dies 

- are done as per the rules prescribed by the Nepal Rastra Bank.

Exchange of Currency:

The Nepal Rastra Bank without any fee or charge - changes a banknote or coin with legal tender in Nepal. This is done with the banknotes or coins of same denomination or of different denominations of the equal value.

SOILED OR COUNTERFEIT CURRENCY :

It is a general fact that most of the people should be aware about the currency they use in the country.


The common question running into most of mind is -

'What do the central bank do with the soiled and counterfeit currency? '
So, in order to help you to get out this doubted general queries, i have made a sincere effort to make you clear regarding this. I have taken the Nepal Rastra Bank (central bank ) as a core basis for understanding.

First of all the meaning of counterfeit coin must be understood.

 Actually, 'Counterfeit coin' means:

• Duplicate coin minted copying the coin issued by the Bank or 

• Counterfeit coin or 

• The Coin prepared by melting or manipulating or 

• The coin prepared by cutting and breaking into two or more places or 

• The coin whose figures, letters and signs have been defaced. 

The central bank

• Withdraws or

• Destroys or 

• Replaces 

- the soiled currency with other banknote or coin.


It is to be understood that, 

the central bank has the power to deny in replacement of the banknote or coin,
The design of which has been deleted, or

which is:

• Torn or

• Defaced or 

• destroyed more than 50% of its portion 

Such withdrawal or destruction of banknotes can be done with or without compensating to the owner of the banknotes or coins.


No owner of the lost or stolen banknotes or coins is reimbursed from the Bank. The Bank can forfeit without any compensation for- the coins or notes, the outer appearance of which is changed, or which is counterfeit coins or fake note.

Provisions Relating to Currency Inventory and Issuance of Currency: 

The Nepal Rastra Bank carries out all the function which is related to currency inventory and issue of currency. The bank regularly supplies the banknotes or coins in order to meet the demand of currency.


Account of Issued Currency:


The Bank maintains the account of the entire banknotes and coins in circulation showing them separately as monetary liability. It must be noted that, such liability don't includes the bank notes and coins in stock or not in circulation.

Currency Recall:

The central bank of Nepal can recall the bank notes and coins which are in circulation within Nepal. This is done through exchange of other bank notes and coins in equivalent amount. 

Similarly, the bank publishes and transmits pubic notice by :

• Clearly specifying the period during which the bank notes or coins must be presented for exchange 

• Where they are to be so presented. 

It must be noted that, when the prescribed time limit given by Nepal Rastra Bank is expired then the bank notes and coins which are to be exchanged will cease to be a legal tender.

For the banknotes and coins which are withdrawn from circulation,and for the currency with defect, the central bank has power to :

• Cut 

• Break 

• Demolish

• Destroy 

- in any manner as prescribed.

Reproduction and Counterfeiting of Currency:

It must be kept into our mind that following activities should not be committed by any persons:-

• To forge, counterfeit or alter banknotes and coin which are in circulation as legal tender in the Nepal. 

• To forge, counterfeit or alter any cheques. 

• To forge, counterfeit or alter any payment card. 

• To possess, transport or issue any banknote or coin or cheque or payment card with the knowledge that such banknote or coin, cheque or payment card was falsely made, forged, counterfeited or altered. 

• To possess, transport any sheet of metal, stone, paper, die or any other material or substance with the knowledge that it was done to be used in - falsely making, forging, counterfeiting or altering any banknote or coin, cheque or payment card. 

• To assist (help) in any of the above activities in any manner. 

NOTE:

Unless a prior written authorization is taken by Nepal Rastra Bank following things should not be done :

• Reproduction of any banknotes, coins, cheques, securities or payment cards, denominated in Rupee 

• Creation of any objects that simply imitate any such banknote, coin, check, security or payment card by their design. 

However, Nepal Rastra Bank strictly takes appropriate legal actions in order to prevent the issue of fake notes or counterfeit currency or duplicate cheque or payment. The Bank keeps upon issuing of necessary order, directives or notices regarding such actions.








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