Police have been on high-alert in the city on the Terai plains near the border with Uttar Pradesh's Bahraich district.
Security has been stepped up to avoid clashes in the city, said Home Ministry spokesperson Yadav Koirala.
"Security personnel have been put on high alert," he said.
Yesterday, a group of pro-monarch activists reinstalled the statue that was removed during the Maoists-backed People's Movement of 2006, sparking tension in the area.
Hundreds of policemen were deployed today as cadres of pro-monarch Rastriya Prajatantra Party-Nepal gathered in the area to reinstall the statue.
King Birendra was the eldest son of King Mahendra, whom he succeeded in 1972.
He ruled the country until his death in the Nepalese royal massacre in June 2001 at a house in the grounds of the Narayanhity Royal Palace, the residence of the Nepalese monarchy.
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