The History of the Nepalese Rupee
"The first coins weren’t issued in Nepal until the sixth century AD when the Licchavi kingdom of Nepal issued copper coins bearing religious designs of Indian origin. Coins were infrequently issued between the eight and seventeenth centuries. During the mid-seventeenth century, the three Malla kingdoms began issuing silver tankas in large quantitites. Patan coins were distinguished by a star, Bhatgaon coins by a triangle and Kathmandu coins by wavy lines. During the mid-eighteenth century, Nepal issued the smallest gold coins ever used: gold 1/2048 mohars weighing 0.002 grams. Nepal exported their silver coins to Tibet until the late 1700s.

Nepal issued Gold Mohar (NPM) and silver Dabals, but a scarcity of coins led to the introduction of Indian Rupees (INR) in the 1800s. The Gold Mohar was divisible into 30 Silver Mohars or 1500 Paisa. The silver Mohar had the same weight as the Indian Rupee and was at par with it.

The Nepal Rupee replaced the Mohar/Paisa in 1932. Since the Nepal Rupee had a lower silver content than the Mohar, it traded at a slight discount to the Indian Rupee with 1.28 Nepal Rupees = 1 Indian Rupee in the 1920s, 1.54 Nepalese Rupees by 1939, but appreciated to 0.65 Nepalee Rupeesduring World War II. In 1951, Nepal issued its first banknotes, denominated in Nepalese Rupees (NPR) which were valued at 1.28 Nepalese Rupees = 1 Indian Rupee, though the market rate was about 1.60 Nepalese Rupees = 1 Indian Rupee. The Rupee was divisible into 100 Paisa.

Because Nepalese citizens exchanged Nepalese coins for Indian currency, this created a drain on Nepal’s silver resources, leading to the introduction of Nepalese banknotes on June 1, 1945. The Government of Nepal issued banknotes from 1950 until 1960, and the Nepal Rastra Bank, established on April 26, 1956, has issued banknotes since 1960. The Foreign Exchange Regulation Act prohibited the use of Indian currency for internal payments, though the act was initially enforced only loosely outside of cities in the Kathmandu valley. By 17 October 1966, enforcement had spread to the whole country. The Indian rupee ceased to be legal tender on October 17, 1966."





Central Bank Website

Sources: http://www.globalfinancialdata.com/index.php3?action=showghoc&country_name=Nepal

http://www.banknoteworld.com/countries/nepal.html