He asserted that his government will not allow Nepal to be used for activities against India and would act whenever there is information about it.
"Sensitivity of India is being taken seriously by Government of Nepal," he said in an interview here.
"We assure India that land of Nepal will not be allowed to be used against India. So any sort of terrorist activity will not be allowed here," Nepal said.
Talking about fake currency rackets, he said whenever there is any information, the people behind it are arrested. "There have been cases where we detected and arrested," he said.
The comments come in the backdrop of India's concerns that ISI and other elements are using Nepal and open borders for carrying out anti-India activities like terrorism and fake currency smuggling.
On the possibility of Extradition Treaty being signed, Nepal said, "We have to wait till political stability in Nepal. There are some (in Nepal) who have reservation."
India has been pushing for the Treaty as it would allow transfer of those engaged in activities against it.
India's concerns were conveyed afresh to the Nepalese leadership, including the Prime Minister, by External Affairs Minister S M Krishna during his visit here last week.
"We understand sensitivity of India," Nepal said.
When referred to a recent cases of fake Indian currency rackets unearthed here with suspected links with ISI and Indian underworld, he promised action, saying: "We will not spare anyone who tramples law of the land and illegal activities will not be permitted."
Five people, including a son of a senior politician and former minister Yunus Ansari, have been arrested in Nepal for allegedly being part of a drugs and fake Indian currency racket, having connection to underworld don Dawood Ibrahim.
The police seized fake Indian currency with a face value of Rs 2,544,500 of Rs 500 and Rs 1,000 denominations.
Nepal, however, refused to share details of the case, saying it was going through the legal processes.
"Anyone under doubt will have to go through the process of law. Can't speak on the case, it is legal issue. Let law take its course," Nepal said.
To a question, he suggested that Indian investigators would not be allowed to question Ansari and others arrested.
"It is responsibility of Nepali law and Nepali agency. India is well aware and understands," he said.
At the same time, Nepal added, "There is a level of confidence and trust (between India and Nepal). Whatever information we get, we have been supplying. We don't have to hide anything. We don't have to protect anyone who is involved in criminal activities."
He also said his country has concerns that some criminals and others might be using Indian soil against his country. "That should be taken care of by India," he said, adding it has been conveyed to India and the response is positive.
