The police fired tear gas and charged the protesters with batons to stop them from proceeding towards the Indian embassy.
The ban is to remain in place until the actor, Hrithik Roshan, apologises.
But the star has denied making any such statements.
Nepal's Deputy Prime Minister, Ram Chandra Poudel, has appealed for calm as violent protests continued for a second successive day.
On Tuesday, four people were killed and 12 injured during clashes between police and student demonstrators who were protesting in the Nepalese capital, Kathmandu.
The police fired tear gas and charged the protesters with batons to stop them from proceeding towards the Indian embassy.
There are also reports of attacks on shops owned by people of Indian origin.
Denial
The Bollywood star has strongly denied making any remarks against Nepal.
"I am completely baffled by this whole controversy... I have unnecessarily been dragged into this," Roshan told the Star TV news channel.
"I have never spoken against Nepal and why should I? I love the Nepalese people just as much as I love the Indian people," he said.
The alleged remark in a television interview turned him into a villain overnight in the eyes of his Nepalese fans.
The angry youths - most of them students - burned Roshan's effigy, tore apart his posters and destroyed video cassettes of his films.
Hrithik Roshan's hit film, Kaho Na Pyar Hai (Say, You Love Me), ran for weeks in many cinema halls this year.
But a number of cinemas in Nepal have now decided to stop screening his films as a sign of protest.
Hindi films and Bollywood stars are very popular in Nepal, but some of them have been embroiled in controversy in recent years.
Last year, actress Madhuri Dixit apologised after an uproar over her remarks that Nepal was a part of India.
Following similar protests 30 years ago, the films of the then superstar, Dharmendra, were banned in Nepal. The ban still continues.