They were arrested during raids carried out by the Central Investigation Bureau of Nepal Police at 12 different stores in Kathmandu Valley yesterday.
"They had been selling male enhancement pills and other health products promising that the use of such items would boost sexual performance. The suspects were running the business with or without registering their firms with the agencies concerned, CIB spokesperson Jeevan Shrestha was quoted as saying by the Himalayan Times.
Despite being registered, the firms had engaged in unauthorised business against the purpose of the licence, SP Shrestha said.
The agency has also confiscated a huge cache of illegal health products.
The arrested Indian nationals are identified as Bikash Goyal and Major Singh.
They have been charged with fraud case and the Kathmandu District Court has remanded the suspects to seven-day judicial custody.