Yunus Ansari, who was freed from Kathmandu Central Jail just six months ago after serving a three-year sentence on a similar charge, was nabbed with the two others from his residence at Nakhipot in Lalitpur district near Kathmandu.
Nepal Police spokesman Ganesh Kesi said fake Indian currency with a face value of Rs 3.5 million was seized by a special police team that raided Ansari's home after getting a tip off.
Ansari is the son of former minister Salim Ansari.
In January 2010, Nepal Police had arrested Ansari with two Pakistani accomplices and a bodyguard in connection with a fake Indian currency and drugs racket having links to Dawood Ibrahim.
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In March 2011, an alleged Indian gunman Jagjeet Singh had opened fire at Ansari inside the jail. Singh, who entered the prison in the guise of a visitor, shot Ansari once in the back.