Only metal coins were circulated in Nepal from Lichchhavi period to 1945 A.D. They were denominated and rates were fixed on the weight of the metal used on the coins. The denomination was called paisa. But in the decades of nineteen forties, the people faced problems with dual monetary exchange system. The Indian coins were also circulated freely and the Nepalese market was flooded with them which affected adversely due to the inadequate communication system, illiterate people and open border. The result was the compulsion of the government to accept the revenue also in Indian currency which pounced another blow to the exchange rate and its value. The pure silver coins started to be exchanged with debased coins infiltrated from India. It resulted in going out the pure silver coins of Nepal and coming in the debased coins from India. This made great deficit in national income. Therefore, the government of Nepal issued for the first time the paper money on 1″ of Ashwin 2002 B.S. (14 October 1945). That time only the denomination of rupee 5, 10 and 100 were issued, the office entrusted to print notes that time was called Sadar Muluki Khana.