20 Paisa – Nepal

In 1978, Nepal's currency situation was characterized by its fixed exchange rate system and close monetary ties to India, a relationship formalized in 1960. The Nepalese rupee (NPR) was pegged to the Indian rupee (INR) at a rate of 1:1.25, with 1.6 NPR equaling 1 INR. This peg facilitated extensive cross-border trade, as India was Nepal's dominant economic partner, but it also meant Nepal's monetary policy was largely dictated by India's economic conditions and decisions made by the Reserve Bank of India. This linkage provided stability but limited Nepal's independent control over its money supply and inflation.

The decade leading up to 1978 saw significant institutional development. The Nepal Rastra Bank (NRB), established in 1956, was gaining experience as the central bank. A key milestone was the issuance of the "Nepal Rastra Bank Act, 1974," which strengthened the NRB's regulatory authority. Furthermore, the "Foreign Exchange Regulation Act of 1978" was enacted, marking a step toward managing foreign currency reserves and transactions more systematically, though the economy remained heavily influenced by India and dependent on agriculture and remittances.

Economically, the period was one of relative stability but within a framework of a tightly controlled and underdeveloped financial system. The fixed peg simplified trade but also exposed Nepal to imported inflation from India. The currency itself was not freely convertible on international markets, and foreign exchange reserves were managed cautiously. Thus, in 1978, Nepal's currency regime was stable yet dependent, operating within a structured but constrained system that balanced the benefits of economic integration with India against the need for gradual moves toward greater monetary autonomy.