The Foreign Exchange (Regulation) Act, 2019 (1962) (“FERA”) 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 financial stability, the Act grants extensive regulatory powers to the Government of Nepal and Nepal Rastra Bank (NRB).
Although the Act dates back to 1962, it remains highly relevant today due to frequent NRB directives, circulars, and recent policy reforms, particularly concerning foreign currency limits, service payments, outward investment, and enforcement.
Objectives and Scope of the Act
The key objectives of FERA include:
- Regulating foreign exchange transactions
- 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
The Act applies to individuals, businesses, banks, importers, exporters, service providers, casinos, foreign investors, and financial institutions operating in Nepal.
Licensing Requirement for Foreign Exchange Transactions
Mandatory NRB Approval
Under Section 3, no person or entity may conduct foreign exchange transactions without prior permission or licensing from Nepal Rastra Bank. This includes buying, selling, holding, transferring, or using foreign currency for business purposes.
Recent Update – Casinos & Entertainment Sector (2025)
NRB clarified in 2025 that casinos and similar entertainment businesses must obtain specific approval before dealing in any foreign currency, including Indian currency. This ended long-standing regulatory ambiguity and reinforced strict compliance under FERA.
Import, Export, and Holding of Foreign Currency
Foreign Currency Limits for Individuals (Entering or Leaving Nepal)
NRB has set clear foreign currency limits under FERA for individuals:
- Maximum foreign currency allowed without declaration:
USD 5,000 (or equivalent in other convertible currencies) - Maximum cash an individual may personally keep:
USD 1,500 - Customs declaration requirement:
Amounts exceeding USD 5,000 must be declared at customs upon entry or exit - Penalty for non-declaration:
Confiscation of currency, fines, and legal action under FERA
Indian Currency Restrictions
- Indian currency notes of ₹200, ₹500, and ₹2,000 are prohibited
- Only limited denominations are allowed under customs and NRB rules
Recent Development – Indian Currency Notes (2025)
Nepal is in the process of allowing higher-denomination Indian currency notes (₹200 and ₹500) after nearly a decade of restriction. This policy shift is expected to ease:
Cross-border trade
Tourism transactions
Remittance inflows
This development directly affects foreign currency regulation under FERA and signals a more practical approach to regional currency movement.
Foreign Currency Limit for Nepali Citizens Traveling Abroad
For Nepali citizens traveling overseas:
- Per-trip foreign currency limit:
USD 3,000 (or equivalent) - Currency must be obtained through licensed banks or money changers
- Use beyond approved purposes may result in penalties
This limit is periodically revised by NRB and remains subject to regulatory discretion under FERA.
Foreign Currency Limits for Businesses & Commercial Transactions
Importers of Goods
- Importers may receive up to USD 100,000 per transaction for goods imports
- Payments may be made through Demand Draft (DD) or Telegraphic Transfer (TT)
- Documentation and banking compliance are mandatory
Payments for Foreign Services
NRB has significantly eased service-payment rules:
- Companies may remit up to USD 25,000 per month for foreign services
- Applies to consultancy, IT services, education, technical, and professional services
- Prior NRB approval is not required within the prescribed threshold
Insurance Companies
- Insurance companies can make foreign payments for specialist services (notably in India)
- NRB approval is not required if there is a recommendation from the Nepal Insurance Authority
Bullion and Precious Metal Transactions
For bullion traders:
- Silver import limit:
Up to USD 300,000 per import - Transactions must be conducted through licensed banks
- Any violation may lead to seizure and prosecution under FERA
Outward Investment by Nepali Companies (Major Legal Reform)
Historically, Nepal prohibited outward investment. However, following the Economic and Business Environment Reform Act, 2081 (2025):
- Nepali companies may now invest abroad with NRB approval
- Priority sectors include IT, technology, and export-oriented industries
- Companies may use:
- A portion of foreign exchange earned from exports, or
- NRB-approved foreign currency ceilings
This represents a landmark shift in Nepal’s foreign exchange policy, aligning the country with global investment practices.
Hedging and Foreign Exchange Risk Management
Under FERA, NRB has issued Hedging Regulations, 2075, allowing eligible projects to hedge foreign exchange risk.
Applicable mainly to:
- Hydropower projects
- Infrastructure projects with foreign loans
- Large foreign-funded investments
Hedging helps protect long-term projects from currency volatility.
Enforcement, Penalties, and Compliance Risks
FERA is enforced by:
- Nepal Rastra Bank
- Central Investigation Bureau (CIB)
- Financial Information Unit (FIU)
- Department of Money Laundering Investigation
Penalties include:
- Confiscation of foreign currency
- Heavy monetary fines (often multiple times the amount involved)
- Imprisonment in serious or repeated violations
Failure to declare currency, use of informal payment channels, and unauthorised online payments are major enforcement priorities.
Practical Legal Implications
- Individuals must strictly follow declaration and holding limits
- Businesses must ensure service payments and imports remain within NRB thresholds
- Casinos and tourism operators require express foreign exchange permission
- IT and export-oriented companies can explore overseas investment opportunities with proper structuring
Early legal review and regulatory compliance are essential to avoid severe penalties.
Conclusion
The Foreign Exchange (Regulation) Act, 2019 (1962) remains the backbone of Nepal’s foreign exchange control regime. While the Act is inherently restrictive, recent NRB updates demonstrate a gradual shift toward controlled liberalisation, particularly for service payments, outbound investment, and business transactions.
Understanding foreign currency limits, declaration requirements, and NRB approvals is critical for individuals, businesses, and investors operating in Nepal.
Onesphere Law Associates provides strategic legal advisory on foreign exchange compliance, NRB approvals, cross-border transactions, and regulatory risk management under Nepalese law.