There are banks in Kathmandu, Pokhara and in several other major cities that will allow you to retrieve cash from ATM or credit cards. You may be charged a service fee, depending on your bank. There are quite a number of ATMs now in those cities that are open round the clock. Although Indian currency is valid in Nepal (at an official exchange rate of 1.60 Nepalese rupees to 1 Indian rupee), the Rs. 500 and Rs. 1000 currency notes are not acceptable. Carrying 500- and 1000-Indian rupee notes is a punishable offence in Nepal.
Be sure to keep all currency exchange and ATM receipts as they are required at the airport bank to convert back to your original currency. If you don't have them, they will refuse to convert your currency but they will suggest going to the Duty Free shop upstairs, even though it isn't a licensed money changer. Traveller's checks may be useful outside of the major cities.