Sample of Gulf rupees used before.
The exchange rate was settled at one-for-one.
An interesting fact that many people might not be aware of today is that long before the UAE dirham even existed, the currency that was used in the UAE was the Gulf rupee.
"Before the story of oil, there was no currency system in the UAE like there was in other developed nations," says Ramkumar, founder of Numisbing. "A lot of different currencies were used in the Trucial States before the dirham was born."
He explains how, during the alliance with the British, the Trucial States used the currency of the largest nation nearest to them. This happened to be India, which was under the rule of the British during the time. It was not uncommon for many countries to use the Indian rupee as their currency, and Ramkumar reveals that as many as 20 countries at one point, in different parts of the world, were doing so.
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"Up until 1957, all the currency notes that were used in India were used in the Trucial States," he revealed.
However, all that began to change when an issue arose. Many traders, it seemed, were smuggling large quantities of gold from the Trucial States into India. The precious metal was cheaper in the Trucial States than in India, and many traders began to take advantage of that fact.
In 1957, special notes called the 'External rupees' or 'Gulf rupees' were printed in India for circulation in the Gulf. These special notes were introduced to curb the widespread gold smuggling that happening in the region. The Gulf rupee notes were in many was identical to the Indian rupee notes that were being printed in India. However, while the design on the notes was the same, their colour was completely different. Another way to distinguish the new notes from those used in India was that they carried a special serial number prefix of 'Z' over a number.
"These new notes came in denominations of Rs1, Rs5, Rs10, and Rs100," says Ramkumar. "In addition to the Trucial states, other GCC countries like Bahrain, Kuwait, Oman, and Qatar also used them; the only country not using them was Saudi Arabia. Now, a person couldn't purchase any gold in the Trucial States with Indian rupees because they were not the legal tender. In addition, you couldn't use the Gulf rupees in India for the very same reason."
For anyone in India now interested in trading in the UAE during this period, they would have to exchange their Indian rupees at the office of issue in Bombay. The exchange rate, Ramkumar, says was settled at one-for-one.
"The Gulf rupees were in circulation from 1957 to 1966," he revealed. "In 1966 however, India devalued its currency, and by that time oil had been discovered in the Trucial States. From 1966 to 1973, the currency that would be used in the Trucial States was the Qatar-Dubai riyal."