Foreign Exchange Law in Nepal: Regulations & Penalties

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Family Law

Updated: March 12, 2026
Nepal Divorce Services

The Foreign Exchange (Regulation) Act 2019 (1962) is the principal legislation governing all foreign currency transactions, cross-border payments, capital movement, and foreign investment in Nepal. The Act gives the Nepal Rastra Bank (NRB) extensive regulatory powers over how money enters and leaves the country — and the penalties for violations are severe, including fines up to three times the transaction amount and imprisonment up to 7 years.

For Non-Resident Nepalis (NRNs) sending money home, businesses engaged in import/export, and anyone dealing in foreign currency, understanding these regulations is essential. This guide covers the key provisions of Nepal's foreign exchange law, currency limits, remittance rules, hundi penalties, investment restrictions, and what happens if you violate them.

Overview of the Foreign Exchange (Regulation) Act 2019

Despite its 1962 enactment date, the Act remains highly relevant through frequent NRB directives and amendments. Under Section 3, no person or entity may conduct foreign exchange transactions without prior permission or licensing from Nepal Rastra Bank.

Aspect	Details
Full name	Foreign Exchange (Regulation) Act 2019 (1962)
Primary regulator	Nepal Rastra Bank (NRB)
Applies to	All individuals, firms, companies, and organizations — including Nepali citizens living abroad and Nepal-registered entities operating overseas
Core principle	All foreign exchange transactions require NRB permission or must be conducted through licensed entities
Key enforcement bodies	NRB, Department of Revenue Investigation (DRI), Central Investigation Bureau (CIB), Nepal Police Cyber Bureau

Foreign Currency Limits for Individuals

NRB has set clear limits on how much foreign currency individuals can hold, carry, and transact:

Rule	Limit
Maximum foreign currency without customs declaration	USD 5,000 (or equivalent)
Maximum cash an individual may personally keep	USD 1,500
Declaration required above	USD 5,000 cash or USD 10,000 total (including traveler's cheques)
Indian currency notes allowed	Only small denominations — INR 200, 500, and 2,000 notes are prohibited (relaxation under consideration)
Penalty for non-declaration	Confiscation of currency, fines, and legal action under FERA

Remittance Rules in Nepal

Remittances account for approximately 25% of Nepal's GDP. Legal remittances increased 16.5% between July 2023 and July 2024, reaching NPR 1.4 trillion (approximately USD 10.5 billion). NRB has updated regulations to encourage formal channels:

Rule	Current Provision
Daily receiving limit	Up to NPR 25 lakhs per day via remittance companies (increased from NPR 20 lakhs)
Authorized channels	Licensed banks, remittance companies, and authorized payment service providers only
Informal channels (hundi)	Completely illegal — both sender and receiver face penalties
Service payment remittance (outward)	Up to USD 25,000 per month for foreign services (consultancy, IT, education) — no prior NRB approval needed
Import payment	Up to USD 100,000 per transaction via DD or TT with banking documentation

Hundi: Nepal's Illegal Remittance System

Hundi (also called "hawala") is an informal money transfer system where funds are transferred through unauthorized networks outside banking channels. It is completely illegal in Nepal under the Foreign Exchange Act and the National Criminal Code 2074.

Why Hundi is a Major Issue

Despite the ban, hundi remains widespread. An estimated 40% of Nepal's economy involves informal transactions. From South Korea alone, approximately 70% of Nepali migrant workers have used hundi to send money home. In February 2025, Nepal was added to the FATF (Financial Action Task Force) grey list — partly due to the scale of informal financial flows including hundi.

Hundi Penalties

Penalty	Details
Forfeiture	Complete confiscation of the transferred amount
Fine	Up to three times the amount illegally transferred
Imprisonment	Up to 3 years under the Foreign Exchange Act
Organized crime charges	If linked to organized networks — up to 90 days detention, enhanced sentences
Money laundering charges	If proceeds are suspected illegal — prosecution under Money Laundering Prevention Act 2008
Blacklisting	Individuals may be blacklisted from traveling to/from Nepal

Both the sender and receiver face penalties. Even if you are a family member innocently receiving hundi money, you can be prosecuted.

Recent Hundi Enforcement

Case	Details
April 2024 crackdown	21 people arrested for financial crimes connected to illegitimate digital wallets used for hundi
November 2024 Kathmandu ring	Police dismantled a large hundi ring facilitating billions of rupees annually; assets seized for forfeiture
CIB 2023 investigation	17 Nepali nationals prosecuted under NRB Act and Organized Crime Act for hundi and crypto transactions
Last 7 years cumulative	203 people arrested (147 Nepalis, 56 foreigners), over NPR 270 million recovered
Current fiscal year (partial)	51 people arrested (45 Nepalis, 6 foreigners), over NPR 59 million recovered

What Activities Are Prohibited?

Under the Foreign Exchange Act, individuals are prohibited from the following without NRB authorization:

Prohibited Activity	Legal Basis
Making any payment to any person residing outside Nepal	FERA, Section 4
Drawing, accepting, or negotiating negotiable instruments creating rights for persons abroad	FERA, Section 4
Making payment on behalf of any person residing outside Nepal	FERA, Section 4
Conducting forex transactions at rates different from NRB-specified rates	FERA, Section 4(2)
Using foreign exchange obtained for one purpose for a different purpose	FERA, Section 4(3)
Importing goods without following NRB forex procedures	FERA, Section 9
Failing to bring back payment for exported goods within prescribed period	FERA, Section 9A
Investing abroad without NRB approval	FERA + Act Restricting Investment Abroad 2021
Cryptocurrency transactions (classified as unauthorized forex)	FERA Section 9(c) + NRB crypto ban directives

Outward Investment: New 2025 Rules

Historically, Nepal prohibited all outward investment by its citizens. However, following the Economic and Business Environment Reform Act 2081 (2025), Nepali companies may now invest abroad with NRB approval. This is a landmark policy shift.

Rule	Details
Who can invest abroad?	Nepali companies (with NRB approval)
Property purchase abroad	Allowed with NRB approval; residential purchases during overseas education have specific provisions
Reporting obligations	Annual reports on investment status, returns, and changes required
Penalty for unauthorized outward investment	Fines up to 3x the amount + imprisonment up to 7 years under Section 25
Additional consequences	Confiscation of illegally transferred funds + blacklisting from future forex transactions

NRN Foreign Exchange Considerations

For Non-Resident Nepalis (NRNs), foreign exchange regulations intersect with several key areas:

NRN Activity	Foreign Exchange Implications
Sending remittances to family	Must use authorized channels only; hundi is illegal and carries 3x fines + 3 years jail
Investing in Nepal (FITTA)	Minimum NPR 50 million; foreign investment must be routed through licensed banks with NRB approval
Property purchase in Nepal	NRN card holders can purchase property within land ceiling limits; payment must come through formal banking channels
Repatriation of investment returns	FITTA allows repatriation of dividends and capital gains in the currency of original investment
Opening bank accounts in Nepal	NRN card holders can open foreign currency accounts in Nepali banks
Divorce and property division abroad	Cross-border asset division during divorce must comply with forex regulations; transferring marital property value internationally requires NRB-compliant channels

Foreign Exchange and Divorce

Foreign exchange law directly impacts NRN divorce cases in several ways:

Situation	Legal Implication
Spouse abroad hiding assets in foreign accounts	Property division requires disclosure; failure to declare foreign assets violates both divorce law and forex regulations
Alimony or maintenance payments from abroad	Must be remitted through authorized banking channels; using hundi for alimony payments is a separate offence
POA fees and legal costs paid from abroad	Embassy POA verification fees and lawyer payments must go through formal banking or remittance channels
Jointly held foreign property	Division or sale proceeds must comply with both the foreign country's laws and Nepal's forex repatriation rules

At Nepal Divorce Services, we handle NRN divorce cases that involve cross-border financial complexities — including property division across jurisdictions, foreign asset disclosure, and compliant remittance of maintenance payments. Contact us for a confidential consultation.

Penalties Under the Foreign Exchange Act

Violation	Penalty (Section 17/25)
Undeclared foreign currency	Confiscation + fine equivalent to undeclared amount
Unauthorized forex transactions	Fine up to 3x the transaction amount
Hundi / informal remittance	Forfeiture + fine up to 3x amount + imprisonment up to 3 years
Unauthorized outward investment	Fine up to 3x amount + imprisonment up to 7 years (Section 25)
Repeat or severe offences	Blacklisting from future forex transactions + enhanced penalties
Suspected money laundering	Additional prosecution under Money Laundering Prevention Act 2008
Import without forex procedures	Fine + potential license revocation
Export payment not received within prescribed period	Deemed violation of the Act; fine + potential criminal charges

FATF Grey List and Its Impact

In February 2025, the Financial Action Task Force (FATF) placed Nepal on its grey list for the first time since 2014. This designation flags Nepal as a high-risk jurisdiction for money laundering and terrorism financing. The grey listing has direct consequences: reduced international credibility, higher costs for international banking relationships, and increased scrutiny on all cross-border financial transactions involving Nepal.

The NRB has responded by intensifying enforcement against hundi, cryptocurrency, and unauthorized forex activities — making it more important than ever for NRNs and businesses to use only authorized channels.

Key Legal References

Law / Document	Relevance
Foreign Exchange (Regulation) Act 2019 (1962)	Primary forex legislation — Sections 3, 4, 9, 9A, 9B, 10C, 17, 25
Nepal Rastra Bank Act 2058 (2002)	NRB's authority to regulate monetary policy and forex
Act Restricting Investment Abroad 2021 (1964)	Prohibition on unauthorized foreign investment
Economic and Business Environment Reform Act 2081 (2025)	New provisions allowing outward investment with NRB approval
Money Laundering Prevention Act 2064 (2008)	AML framework applicable to forex violations
National Criminal Code 2074	Criminal penalties for hundi, organized financial crime
Foreign Investment and Technology Transfer Act (FITTA) 2019	NRN/foreign investment framework — NPR 50M minimum, repatriation rights
NRB Integrated Circular for Payment Systems 2023	Updated remittance regulations and channel requirements

Frequently Asked Questions

The Foreign Exchange (Regulation) Act 2019 (1962) is Nepal's principal legislation governing all foreign currency transactions, cross-border payments, and foreign investment. Nepal Rastra Bank (NRB) is the primary regulator with authority to issue directives, grant licenses, and enforce penalties.

You can carry up to USD 5,000 (or equivalent) without a customs declaration. Amounts exceeding USD 5,000 in cash or USD 10,000 total (including traveler's cheques) must be declared. Maximum cash you can personally keep is USD 1,500. Indian currency notes of INR 200, 500, and 2,000 denominations are currently prohibited.

No. Hundi (informal remittance) is completely illegal under the Foreign Exchange Act and the National Criminal Code 2074. Both the sender and receiver face penalties including forfeiture of the money, fines up to three times the amount, and imprisonment up to 3 years.

Hundi penalties include: confiscation of the transferred amount, fines up to 3 times the amount illegally transferred, and imprisonment up to 3 years. If connected to organized crime, detention of up to 90 days is possible. Suspected money laundering triggers additional prosecution under the Money Laundering Prevention Act 2008.

You can receive up to NPR 25 lakhs per day via licensed remittance companies (increased from the previous NPR 20 lakh limit). All remittances must come through authorized banking channels or licensed remittance service providers.

As of 2025, Nepali companies can invest abroad with NRB approval under the Economic and Business Environment Reform Act 2081. However, investing abroad without NRB authorization is illegal and carries fines up to 3 times the amount plus imprisonment up to 7 years under Section 25 of the Foreign Exchange Act.

NRNs must use authorized banking channels or licensed remittance companies (like IME, Prabhu, Western Union, etc.) to send money to Nepal. Using hundi, cryptocurrency, or any informal channel is illegal and punishable under the Foreign Exchange Act.

Undeclared foreign currency exceeding the USD 5,000 limit will be confiscated by customs authorities. You may also face fines equivalent to the undeclared amount and potential blacklisting from future travel. In severe cases, prosecution under the Foreign Exchange Act can lead to imprisonment.

Nepal was added to the FATF grey list in February 2025 due to concerns about money laundering, terrorism financing, and the scale of informal financial flows (particularly hundi). This designation lowers Nepal's global economic standing and increases scrutiny on all cross-border financial transactions.

Foreign exchange law impacts NRN divorces in several ways: property division involving foreign assets must comply with forex disclosure rules, alimony payments from abroad must use authorized channels (not hundi), and POA fees and legal costs must be remitted through formal banking. Contact Nepal Divorce Services for guidance.

Yes. Companies can remit up to USD 25,000 per month for foreign services including consultancy, IT, education, technical, and professional services without prior NRB approval. Insurance companies can also make foreign payments for specialist services with Nepal Insurance Authority recommendation.

Importers may receive up to USD 100,000 per transaction for goods imports through Demand Draft (DD) or Telegraphic Transfer (TT). Full banking documentation and compliance with NRB procedures is mandatory.

Yes. NRN card holders can purchase property in Nepal within land ceiling limits. However, payment must come through formal banking channels. Sending property purchase money via hundi or crypto is a separate criminal offence on top of any property law violations.

Under Section 25 of the Foreign Exchange Act, unauthorized foreign investment carries fines up to three times the transaction amount and imprisonment up to 7 years. NRB may also confiscate illegally transferred funds and blacklist violators from future forex transactions.

Yes. Foreign exchange violations involve complex overlapping laws (FERA, NRB Act, Money Laundering Act, Criminal Code) and carry severe penalties including imprisonment up to 7 years. If you are under investigation or have been arrested for forex violations, contact Nepal Divorce Services for immediate legal consultation.

At Nepal Divorce Services, known as the first divorce law firm in Nepal, we understand that taking the first step toward divorce can feel overwhelming. Our experienced divorce lawyer in Nepal is here to guide you through the divorce process in Nepal and clearly explain divorce law in Nepal. Reach out today for confidential support and take the next step with confidence and clarity.

Whether you're inside or outside Nepal and need assistance with filing a divorce case in Nepal, we're here to help. Our services are accessible worldwide. You can contact us directly at +977 9841114443. We're also available on Viber and WhatsApp. Feel free to reach out to us with any inquiries or for expert guidance on divorce proceedings.