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The Foreign Exchange (Regulation) Act 2019 (1962) is Nepal's principal legislation governing foreign currency, foreign exchange transactions, cross-border payments, capital movement, and foreign investment. Enacted to safeguard Nepal's foreign exchange reserves and maintain the economic interests of the general public, the Act grants extensive regulatory powers to the Government of Nepal and Nepal Rastra Bank (NRB). This guide provides a comprehensive overview of the foreign exchange regulatory framework in Nepal, including licensing requirements, transaction procedures, restrictions, and penalties.
What is the Foreign Exchange (Regulation) Act 2019?
The Foreign Exchange (Regulation) Act 2019 (1962 AD), commonly referred to as FERA, is Nepal's foundational law regulating all foreign exchange-related transactions. The Act was enacted to further regulate foreign exchange transactions in order to maintain the economic interests of the general public. Despite being enacted in 1962, the Act remains highly relevant today due to frequent amendments and NRB directives that adapt to modern financial realities.
The Act has been amended multiple times, with significant amendments in 1987, 2002, and 2010 to address evolving economic conditions and international financial standards.
Objectives and Scope
The key objectives of the Foreign Exchange (Regulation) Act include:
- Regulating foreign exchange transactions in Nepal
- Controlling import and export of foreign currency and bullion
- Preventing illegal capital flight and informal payment systems
- Ensuring foreign exchange earnings flow through formal banking channels
- Protecting Nepal's foreign exchange reserves
- Facilitating legitimate foreign investment and repatriation
Territorial Application
The Act extends throughout Nepal and also applies to:
- All citizens of Nepal who reside outside Nepal
- All firms, companies, bodies registered in Nepal operating outside Nepal
- Branches and agencies of such entities operating abroad
Key Definitions
Understanding the definitions under Section 2 of the Act is essential for compliance:
| Term | Definition |
|---|---|
| Currency | Currency notes, postal orders, money orders, cheques, drafts, travelers cheques, letters of credit, bills of exchange, promissory notes, credit cards, and similar monetary instruments as prescribed by NRB |
| Foreign Currency | Any currency other than Nepalese currency; includes Special Drawing Rights (SDR) from IMF, Asian Currency Unit, European Currency Unit, and instruments prescribed by NRB |
| Nepalese Currency | Currency tendered in Nepalese Rupees |
| Convertible Foreign Currency | Foreign currencies designated as convertible by NRB through public notice |
| Foreign Exchange | Foreign currency, deposits, credits and balances paid or received in foreign currency, foreign securities, cheques, drafts, travelers cheques, electronic fund transfers, credit cards, letters of credit, bills of exchange, and promissory notes in international circulation payable in foreign currency |
| Foreign Exchange Transaction | Purchase, sale, lending, borrowing of foreign exchange or receiving/giving foreign exchange in any manner; includes NRB permission to convert foreign exchange |
| Licensee | Person, firm, company, or body that has obtained license from NRB to carry on foreign exchange transactions |
| Foreign Investment | Investment by foreign investor in shares, deposits, reinvestment of income, or loans/loan facilities in any firm, company, or body |
| Person Residing in Nepal | Nepali citizen (except those residing abroad beyond NRB-specified period) or non-Nepali citizen residing in Nepal beyond NRB-specified period for employment, trade, or business |
Licensing Requirements
Under Section 3 of the Act, no person, firm, company, or body may conduct foreign exchange transactions without obtaining a license from Nepal Rastra Bank.
Application Process
| Step | Description |
|---|---|
| Step 1: Application Submission | Submit application to NRB with details specified by the Bank |
| Step 2: Bank Evaluation | NRB conducts necessary inquiry based on specified criteria |
| Step 3: License Issuance | If deemed appropriate, NRB issues license specifying type and limit of foreign exchange, transaction period, and other terms |
| Step 4: Fees and Deposits | Licensee bank pays annual fees and deposits as prescribed by NRB |
| Step 5: Compliance | Licensee must abide by all orders and directives issued by NRB |
Provisional License
NRB may issue a provisional (Patake) license to persons, firms, companies, or entities that apply for temporary foreign exchange transaction authorization, subject to specific conditions.
NRB's Power to Take Action
Under Section 3A, if a licensee fails to abide by NRB orders or directives, the Bank may take the following actions:
- Admonish the licensee
- Impose restrictions on any or all foreign exchange transactions
- Forfeit cash deposit or recover from guarantee
- Suspend or cancel the license
The licensee must be provided reasonable opportunity to defend before any action is taken.
Licensing Fees Under NRB Bylaw 2020
The Nepal Rastra Bank Foreign Exchange Transaction Licensing and Inspection Bylaw 2020 specifies the following fees:
For Banks and Financial Institutions
| Institution Type | License Fee (NPR) |
|---|---|
| Commercial Bank (Class A) | NPR 500,000 (lump sum) |
| National Level Development Bank | NPR 100,000 (lump sum) |
| Provincial Level Development Banks and Finance Companies | NPR 20,000 (lump sum) |
For Hotels, Travel Agencies, and Other Institutions
| Institution Type | Annual License Fee (NPR) | Bank Guarantee Required |
|---|---|---|
| Departmental Store/Supermarket, Airlines, 3-Star+ Hotels | NPR 4,000 per place of transaction | NPR 100,000 per place |
| Other Hotels, Resorts, Travel Agencies, Trekking, Cargo | NPR 2,000 per place of transaction | NPR 50,000 per place |
For Casinos
| Casino Type | License Fee (NPR) | Bank Guarantee (NPR) |
|---|---|---|
| Standard Casino | NPR 100,000 per place | NPR 2,500,000 |
| Modern Machine/Equipment Only | NPR 50,000 per place | NPR 1,000,000 |
Procedures for Foreign Exchange Transactions
Section 4 establishes the fundamental procedures for conducting foreign exchange transactions:
Key Rules
- No person shall carry on foreign exchange transactions with any person other than a licensee without NRB permission
- Transactions must be conducted at the exchange rate specified by NRB
- Foreign exchange obtained for a specific purpose cannot be used for any other purpose
- If foreign currency cannot be used for intended purpose, it must be sold to a licensee within 30 days at NRB-specified rate
- Payment for sale of goods or services to foreigners must be received in convertible foreign currency unless otherwise specified by NRB
Provisions for Nepali Citizens
Under Section 4A, a citizen of Nepal who has earned foreign exchange or made investments during stay in a foreign country may keep such foreign exchange or investments abroad even after returning to Nepal, subject to informing NRB.
Import Regulations
Section 8 specifies duties of importers when using foreign exchange:
| Requirement | Description |
|---|---|
| Timely Import | Import goods within the time specified by NRB after opening letter of credit |
| Document Submission | Submit documents as specified by NRB |
| Letter of Credit Compliance | Import goods in consonance with price and quantity in letter of credit (amendments allowed) |
| Actual Invoicing | Maintain actual invoicing; no over-invoicing or under-invoicing |
| Guarantor Liability | If another entity provides guarantee and misappropriation occurs, guarantor is also liable |
Export Regulations
Sections 9A and 9B govern export-related foreign exchange requirements:
Exporter's Duties
- Declare intent to bring payment of declared value within approved period in approved foreign exchange
- If payment amount differs from declared value, submit application to NRB with evidence
- Failure to receive payment within prescribed time constitutes violation of the Act
- If unable to receive payment, submit reasonable explanation to NRB
Prohibited Acts for Exporters
- Receiving payment through modes other than prescribed
- Delaying payment beyond prescribed period
- Taking any action to avoid receiving full payment value
- Defying actual invoicing or related acts
Restrictions Under the Act
Restriction on Making or Receiving Payment (Section 9C)
No person residing in Nepal shall do the following without NRB permission:
- Make payment of any kind to any person residing outside Nepal
- Draw, accept, or negotiate negotiable instruments or promissory notes creating payment rights for persons outside Nepal
- Accept loans creating payment rights for persons outside Nepal
- Make payment by order or on behalf of persons residing outside Nepal
Restriction on Export and Transmission of Securities (Section 10)
Except with NRB permission, no person shall:
- Export any securities to any place outside Nepal
- Transmit any securities to any person residing outside Nepal
- Give any securities to persons outside Nepal for earning, use, or control
Restriction on Investment (Section 10A)
Investment by foreign investors in Nepal or by Nepali persons abroad must be made as specified by NRB through public notice. However, this does not affect investments made by Nepali citizens residing in Nepal from their earnings abroad.
Restriction on Lending and Borrowing (Section 10B)
Except in accordance with prevailing law and NRB provisions, no person shall lend or borrow a loan in foreign exchange.
Foreign Currency Limits
NRB has set specific foreign currency limits for individuals and businesses:
For Individuals
| Category | Limit |
|---|---|
| Maximum foreign currency without declaration (entry/exit) | USD 5,000 or equivalent |
| Maximum cash an individual may keep | USD 1,500 |
| Nepali citizens traveling abroad (per trip) | USD 3,000 or equivalent |
| Online purchase of services (prepaid card) | USD 500 per year |
For Businesses
| Transaction Type | Limit | Requirements |
|---|---|---|
| Import of goods (per transaction) | Up to USD 100,000 | Through DD or TT with documentation |
| Foreign services payment | Up to USD 25,000/month | No prior NRB approval required |
| Foreign services (with regulatory body recommendation) | Up to USD 12,000 | Direct from commercial bank |
| Foreign services (above USD 12,000) | As approved | NRB Banking Department approval required |
| Silver import | Up to USD 300,000 | Through licensed banks |
Indian Currency Restrictions
Indian currency notes of ₹200, ₹500, and ₹2,000 denominations are currently restricted. Only limited denominations are allowed under customs and NRB rules. Nepal is in the process of allowing higher-denomination notes to ease cross-border trade and tourism.
Repatriation and Foreign Investment
Section 10C provides provisions for repatriation of foreign investment:
Entitled Repatriation
A foreign investor who has obtained permission to invest in securities is entitled to repatriate:
- Investment made in securities and profits/dividends earned
- Investment made in loans/loan facilities and interest thereof
- Technological fees, royalties as per technology transfer agreements
Nepali Citizens Abroad
Nepali citizens residing outside Nepal who obtain permission to invest in Nepal in foreign exchange are entitled to the same repatriation facilities.
Outward Investment (Recent Reform)
Following the Economic and Business Environment Reform Act 2081 (2025), Nepali companies may now invest abroad with NRB approval in priority sectors including IT, technology, and export-oriented industries using foreign exchange earned from exports or NRB-approved ceilings.
Government's Power to Obtain Foreign Exchange
Section 6 grants the Government of Nepal emergency powers during economic or monetary crisis:
- May order citizens owning foreign exchange to produce it for sale to NRB or authorized persons at bank-determined rates
- May require transfer of rights to foreign exchange in the name of the Government
- Government may exempt certain persons or classes from such orders
This power does not apply to foreign exchange obtained by any person from a licensee for approved purposes.
Opening Bank Accounts
Under Section 16:
- Any Nepali citizen residing in Nepal or company/firm registered in Nepal must obtain NRB permission to open an account with a foreign bank
- NRB may demand required statements and specify terms and conditions
- Operation and use of such accounts shall be as specified by NRB
- Opening accounts in foreign currency within Nepal is also subject to NRB provisions
Investigation and Enforcement
Investigating Officer
The Government of Nepal may designate investigating officers to inquire and investigate offenses under the Act. Investigating officers have powers to:
- Search suspicious persons (body search by same gender)
- Stop and search motor vehicles
- Search buildings or places of transaction with memorandum
- Arrest persons suspected of violating the Act
- Hold persons in detention up to 30 days (not more than 7 days at a time) with court permission
Inspection Powers
Under Section 14, the Government or NRB may inspect accounts, books, and documents of any licensee. Licensees must submit all demanded documents and provide all requested information. Failure to comply constitutes violation of the Act.
Penalties for Violations
Section 17 prescribes penalties for violations of the Act:
| Violation | Penalty |
|---|---|
| Contravention of Act, Rules, Orders, Directives | Forfeiture of foreign exchange + Fine from amount in question to 3x the amount |
| When amount cannot be determined | Fine up to NPR 200,000 |
| Employee violating Act or divulging secrecy | Fine up to NPR 100,000 |
| Offense by firm/company/body | Directors, office-bearers, employees responsible are liable |
| Importer violating procedures or over-invoicing | Fine from amount in question to 3x the amount |
| Exporter violating Sections 9A, 9B, 9C | Fine from amount in question to 2x the amount |
| Accomplice to import/export offense | Half the punishment of primary offender |
| Failure to pay fine | Imprisonment up to 4 years |
| Amount in question NPR 10 million or more | Additional imprisonment up to 3 years |
| Constitutional body chief/member or political appointee | Double punishment (max additional 2 years imprisonment) |
Reward for Information
Under Section 20, if any person provides information leading to seizure of foreign exchange and proof of offense, they shall receive 20% of the amount determined by converting the seized foreign exchange to Nepalese currency as reward after final settlement of the case.
Void Contracts
Section 13 prohibits entering into any contract or executing any document in contravention of the Act. Under Section 19, any contract or document executed in violation may be voided by court order.
Protection from Legal Action
Under Section 21:
- No case or legal action shall be instituted against any person for acts done in good faith under this Act
- No claim for loss or damage may be made for non-provision of foreign exchange by Government, NRB, or licensee (except for knowing or reckless acts)
Related Legal Framework
The Foreign Exchange (Regulation) Act operates alongside other related legislation and regulations:
- Foreign Investment and Technology Transfer Act (FITTA) - governs foreign investment procedures
- Asset (Money) Laundering Prevention Act - anti-money laundering compliance
- Companies Act 2063 - company registration and compliance
- NRB Unified Foreign Exchange Management Circular - detailed operational guidelines
- NRB Foreign Exchange Transaction Licensing and Inspection Bylaw 2020 - licensing procedures
- NRB Foreign Investment and Loan Management Bylaws 2078 - investment management
Need Legal Assistance?
If you require assistance with foreign exchange compliance, NRB licensing, import-export documentation, foreign investment structuring, or any foreign exchange-related legal matters, our lawyers can provide expert guidance. Contact us for professional legal assistance with foreign exchange regulations in Nepal.
Frequently Asked Questions
The Foreign Exchange (Regulation) Act 2019 (1962 AD), commonly known as FERA, is Nepal's principal legislation governing foreign currency, foreign exchange transactions, cross-border payments, capital movement, and foreign investment. The Act was enacted to regulate foreign exchange transactions and maintain the economic interests of the general public. It grants extensive regulatory powers to the Government of Nepal and Nepal Rastra Bank (NRB) to control foreign currency flows, protect foreign exchange reserves, and ensure legitimate transactions flow through formal banking channels. The Act applies throughout Nepal and to all Nepali citizens, firms, and companies operating abroad.
Under Section 3 of the Foreign Exchange (Regulation) Act, any person, firm, company, or body intending to conduct foreign exchange transactions must obtain a license from Nepal Rastra Bank. This includes:
| Entity Type | License Requirement |
|---|---|
| Commercial Banks | Mandatory license with NPR 500,000 fee |
| Development Banks | Mandatory license with NPR 100,000 (national) or NPR 20,000 (provincial) fee |
| Hotels, Travel Agencies, Trekking | Mandatory license with annual fee NPR 2,000-4,000 per location |
| Casinos | Mandatory license with NPR 50,000-100,000 fee and bank guarantee |
| Any other entity dealing in foreign exchange | Prior NRB permission required |
The application process involves:
(1) Application Submission - submit application to NRB with all details specified by the Bank;
(2) Bank Evaluation - NRB conducts necessary inquiry based on specified criteria including financial standing and compliance history;
(3) License Conditions - if deemed appropriate, NRB specifies type and limit of foreign exchange, transaction period, and other terms;
(4) Fees and Deposits - pay applicable licensing fees and bank guarantees as prescribed;
(5) License Issuance - NRB issues license upon satisfaction of all requirements;
(6) Ongoing Compliance - licensee must abide by all NRB orders and directives.
NRB may also issue provisional (Patake) licenses for temporary authorization subject to specific conditions.
Under Section 9C, no person residing in Nepal shall, without NRB permission:
(a) make payment of any kind in any manner to any person residing outside Nepal;
(b) draw, accept, or negotiate any negotiable instrument or promissory note creating payment rights for persons outside Nepal;
(c) accept any loans creating payment rights for persons residing outside Nepal;
(d) make payment of any kind by order or on behalf of any person residing outside Nepal.
All cross-border payments must be conducted through licensed entities and formal banking channels in compliance with NRB circulars and the Act's provisions.
NRB has established specific foreign currency limits:
| Category | Limit |
|---|---|
| Maximum foreign currency without customs declaration | USD 5,000 or equivalent |
| Maximum cash an individual may personally keep | USD 1,500 |
| Nepali citizens traveling abroad (per trip) | USD 3,000 or equivalent |
| Online purchase of services (prepaid card) | USD 500 per year |
| Convertible foreign currency account purchases | USD 2,000 annually |
Amounts exceeding USD 5,000 must be declared at customs upon entry or exit. Non-declaration may result in confiscation, fines, and legal action under FERA.
Section 8 specifies that importers using foreign exchange must:
(1) import goods within the time specified by NRB after opening letter of credit;
(2) submit all documents as specified by NRB to the bank;
(3) import goods in consonance with price and quantity stated in the letter of credit (amendments allowed);
(4) follow NRB-prescribed procedures for type of foreign exchange and payment methods;
(5) maintain actual invoicing - no over-invoicing or under-invoicing;
(6) follow prescribed procedures for importing knowledge and informative technology.
If another entity provides guarantee for a letter of credit and misappropriation occurs, the guarantor is also liable for punishment under the Act.
Under Sections 9A and 9B, exporters must:
(1) declare before Customs Officer that payment of declared value will be received within the period and approved foreign exchange prescribed by NRB;
(2) fill required details in export declaration form;
(3) if payment amount differs from declared value, apply to NRB with supporting evidence;
(4) receive payment only through prescribed modes;
(5) not delay payment beyond prescribed period;
(6) not take any action to avoid receiving full payment value;
(7) maintain actual invoicing. Failure to receive payment within prescribed time constitutes violation of the Act.
NRB may order the exporter to bring payment if goods are sold, or sell the goods and bring payment or return them to Nepal.
Section 17 prescribes penalties including:
| Violation | Penalty |
|---|---|
| General contravention | Forfeiture of foreign exchange + fine from amount in question to 3x amount |
| When amount cannot be determined | Fine up to NPR 200,000 |
| Employee violating Act or divulging secrecy | Fine up to NPR 100,000 |
| Importer violating procedures/over-invoicing | Fine from amount in question to 3x amount |
| Exporter violations | Fine from amount in question to 2x amount |
| Accomplice to offense | Half the punishment of primary offender |
| Failure to pay fine | Imprisonment up to 4 years |
| Amount in question NPR 10 million+ | Additional imprisonment up to 3 years |
| Constitutional body members/political appointees | Double punishment (max additional 2 years) |
Yes, under Section 6, in the event of foreign exchange crisis due to economic and monetary crisis, the Government of Nepal may, by Notification in Nepal Gazette, order citizens owning foreign exchange to:
(a) produce or arrange production of foreign exchange for sale to NRB or authorized persons at rates determined by the Bank;
(b) transfer rights to foreign exchange in the name of the Government at bank-determined rates.
The Government may exempt certain persons or classes from such orders. This power does not apply to foreign exchange obtained by any person from a licensee for approved purposes with NRB permission.
Under Section 10, except with NRB permission, no person shall:
(a) export any securities to any place outside Nepal;
(b) transmit any securities to any person residing outside Nepal;
(c) give any securities to any person residing outside Nepal for earning, use, or control.
The term "transmission" includes transmission made in form of loan or securities. This restriction ensures that capital movement in the form of securities is controlled and channeled through proper regulatory approval to protect Nepal's financial stability and foreign exchange reserves.
Under Section 10C, foreign investors who have obtained permission to invest in securities are entitled to repatriate in foreign currency:
(a) investment made in securities and profits/dividends earned;
(b) investment made in loans/loan facilities and interest thereof;
(c) technological fees, royalties as per technology transfer agreements.
Repatriation is based on the value of enlisted securities at stock exchange, or for non-enlisted securities, on property value determined per NRB procedures. Foreign persons may also transfer securities to other foreign persons upon payment of required taxes/fees. Nepali citizens residing outside Nepal with permission to invest in Nepal in foreign exchange are entitled to the same facilities.
Under Section 16, any Nepali citizen residing in Nepal or any company, body corporate, or firm registered in Nepal must obtain NRB permission to open an account with a bank in a foreign country. When giving permission, NRB may demand required statements and specify terms and conditions. The operation and use of such accounts shall be as specified by NRB through public notice. Similarly, opening and operating accounts in foreign currency within Nepal is also subject to NRB provisions. Violation of these provisions constitutes an offense under the Act with applicable penalties.
The Government of Nepal may designate investigating officers with powers to:
(1) search suspicious persons (body search by same gender only);
(2) stop and search motor vehicles suspected of use in violations;
(3) search buildings or places of transaction with written memorandum;
(4) take into custody foreign exchange and related documents found during search;
(5) arrest persons suspected of violating the Act at any place;
(6) hold persons in detention up to 30 days (not more than 7 days at a time) with court permission.
The Government or NRB may also inspect accounts, books, and documents of any licensee, and failure to provide demanded documents constitutes violation of the Act.
Recent developments include:
(1) Economic and Business Environment Reform Act 2081 (2025) allowing Nepali companies to invest abroad with NRB approval in priority sectors;
(2) NRB allowing companies to remit up to USD 25,000/month for foreign services without prior approval;
(3) Foreign exchange facility provisions for airlines, national pride projects, and Nepali citizens for online purchases;
(4) Process to allow higher-denomination Indian currency notes (₹200, ₹500) after nearly a decade of restriction;
(5) Clarification that casinos and entertainment businesses must obtain specific approval for any foreign currency dealings;
(6) Hedging Regulations 2075 allowing eligible projects to hedge foreign exchange risk.
These reforms indicate gradual liberalization while maintaining regulatory control.
Required documents include:
(1) Company/institution registration certificate;
(2) Income tax (PAN) registration certificate;
(3) Industry registration certificate (if applicable);
(4) Permit/permission from concerned government agency;
(5) Original payment voucher for license fee;
(6) Tax invoice with PAN number;
(7) Rental agreement with landlord's citizenship copy;
(8) Citizenship certificates and photographs of directors/partners/shareholders;
(9) Location map of transaction place;
(10) Credit Information Bureau letter confirming not blacklisted;
(11) Proof of rental tax payment;
(12) Bank guarantee or cash security deposit;
(13) Self-declaration regarding AML/CFT compliance;
(14) Bio-data of directors;
(15) Board decision regarding license application.
Additional documents may be required based on institution type and NRB specifications.
