History of the caste system in Nepal

The Nepalese civil code Muluki Ain (1854) was written by Jang Bahadur Rana after his European tour. It codified social codes in practice for several centuries in Nepal that was rooted in Vyavahāra (traditional Hindu legal procedure), Prāyaścitta (avoidance and removal of sin) and Ācāra (the customary law of different castes and communities). These three are collectively called Dharmaśāstra. A traditional Hindu king was duty-bound to put these precepts into practice.This text is just misleading. This should be named untouchability in Nepal not nepalese caste system. Worst information here
Muluki Ain divided Nepalese citizens into two castes "the caste whose water is allowed to remain pure" and "the caste whose water is defiled". Chiefs of the various castes were entrusted with sorting out issues related to their own castes.^[1] The heads of Kamis (blacksmiths) and Sarkis (tanners and cobblers) were called Mijhars. Similarly the head of Damai (tailors and musicians) was called Nagarchi. Castes of the first (non-defiling) category also had their chiefs. In this way community members might not need to go to courts or government offices to settle minor legal matters. Mijhars and Nagarchis, however, added to injustice and exploitation meted out to their respective communities. They were obviously influenced by their masters' natures.^{[citation needed]} Like their masters, they never hesitated to do injustice against their own communities. No appeal was heard against them.
From the medieval period onward, people could lose status through caste demotion. People considering themselves superior used caste as a pretext for exploitation. The lower castes were prevented from entering temples, receiving education, listening to high-caste people's teachings, worshipping, planting Bar or Pipal trees, digging ponds, and participating in fairs and festivals. They could be exiled from the country for looking at a high-caste woman. If they encountered someone of higher caste they would have to step aside. They had to pay jadau (obeisance) to any higher caste person. They could be put to death for rebelling against caste rules. If someone from higher caste married a woman from lower caste, he was not eligible for legal intercession against jarikhat (adultery). A sacred thread-wearing or even non-thread-wearing person would need to be ritually purified if they were touched by an 'untouchable'. Two-way conversation with upper castes was banned for them. These discriminatory provisions of the civil code were based on Hindu scriptures like Parskar Grihyasutra, Gautam Sutra, Manusmṛti and Shukra Niti.^[2][3] There was no provision for lower-caste participation in the economic, social, cultural and administrative spheres. They had to survive on low-paid manual work such as playing indigenous musical instruments, sawing wood, leather-work, practicing music, art and dance, cutting stone, pottery, general labor, cleaning latrines, and washing clothes. This system prevailed till by law until Muluki Ain was revised in 1962.
The present caste system derives from Shah dynasty founder Prithvi Narayan's famous saying that Nepal was a garden of four varnas and 36 castes.^[4] However this is only a rough estimate for the Hill region. The Newari community and the Terai community each has more than 36 castes.