Nepal Rastra Bank Act, 2058

Chapter 6 Monetary Unit, Banknotes and Coins

Section 52: Power to Issue Banknotes and Coins
1) The Bank shall have a monopoly over the issue of banknotes and coins in Nepal. Such notes and coins shall be legal tender in Nepal.
2) The Bank shall issue notes pursuant to sub-section (1), only against the security, and the liability of such issued notes shall be equal to the value of the property kept as security. At least fifty percent of the property to be kept as security shall be one or more of gold, silver, foreign currency, foreign securities, and foreign bills of exchange and the remaining percentage shall be one or more of the coins (Mohar Double or coins of higher denomination) the Debt Bond issued by Government of Nepal, the promissory note or bills of exchange payable in Nepal within a maximum of eighteen months from the date of repayment by bank.
Provided that with the permission of the Government of Nepal the ratio of property kept as security may be at least forty percent one or more of gold, silver, foreign currency, foreign securities, and foreign bills of exchange and the remaining percentage shall be one or more of the coins (Mohar Double or coins of higher denomination) the Debt Bond issued by Government of Nepal, the promissory note or bills of exchange payable in Nepal within a maximum of eighteen months from the date of repayment by bank.
3) For the purpose of sub-section (2), the valuation of property shall be made as follows:
(a) The price of gold at the rate fixed by the Government of Nepal on the recommendation of the Board,
(b) The price of silver at the rate deemed appropriate by the Board,
(c) The foreign currencies at the exchange rate fixed by the Bank,
(d) The Debt Bond issued by the Government of Nepal, the foreign securities and Bills of Exchange at the rate deemed appropriate by the Board on the basis of market rates,
(e) Coins at the rate of face value.
4) The Bank shall issue banknotes of various denominations as necessary. While issuing banknotes in this way, the figures appearing on the notes, size, and denominations shall be as approved by the Government of Nepal. The figures, internal security arrangements, materials for printing banknotes, and other materials shall be as decided by the Board.
5) The Government of Nepal may, in consultation with the Board, declare that banknotes of any denomination shall cease to be legal tender in any place other than the prescribed place or office, having published a notification in the Nepal Gazette.
6) The Bank shall not reissue the notes, which are torn, defaced or excessively soiled.
7) The Bank may, with the approval of the Government of Nepal, mint and bring into circulation coins of whatever metal or mixture of metals bring into circulation coins that have been minted at the Mint on special occasions. The Bank may, if it deems it appropriate, cause such coins to be minted in any foreign Mint.
Provided that, if coins minted once with the approval are to be reminted, no approval of the Government of Nepal shall be required.
8) The Bank may, with the approval of the Government of Nepal, mint the coins sent for minting by a foreign government.
9) The Bank shall be responsible for the payment of banknotes issued by the Bank and those issued by the Government of Nepal prior to the establishment of the Bank.
10) No liability other than the liability referred to in sub-section (9) shall be borne from the property given as security for the issuance of banknotes.