Gulf Rupees, issued by Reserve Bank of India

Prior to the 1960's, countries such as UAE, Qatar, Bahrain, Kuwait and Oman utilized the Indian Rupee as their designated currency. Before the oil boom of the 1960s, despite being economically modest, centered around trading dates, camels, fishing and pearl diving. It was more feasible for the Gulf States to use the Indian Rupee, which was minted in India by the British East India Company and later by the Government of British India. 

Even following India's independence in 1947, the Indian Rupee continued as their official currency. The ''Gulf Rupee'' notes were introduced through a legislative bill that was approved by both houses of Indian Parliament in May 1959. The Gulf Rupee was the official currency of countries around the Persian Gulf between 1959 and 1966 (1970 Oman).

                        

Persian Gulf Issue, One Rupee, A K Roy, 1959

These notes were known as the ''External Rupee'' or the ''Gulf Rupee'' and were designated for use solely in the Persian Gulf region, not as legal tender in India. One of the reasons for creating these Gulf Rupees was the large scale of gold smuggling into India, mainly from the Gulf countries due to the substantial price difference and proximity to India. A report by the Reserve Bank of India (RBI) in 1959, revealed gold worth 92.4 million USD had been illicitly brought into India. 

The exchange process in the Gulf States was successfully concluded. As the Gulf States were transitioning from the Indian Rupee to their own currencies, six weeks from May 1959 to June 1959 were allocated to swap all old Indian Rupees in circulation in the Gulf with the new currency notes. It was estimated that when the special notes were introduced, there were around 300 to 500 million Rupees in circulation in the Gulf.

The Gulf Rupee notes shared a similar design to the Indian notes but had a few distinctions. They came in different colours, were only redeemable in Bombay, and had a unique serial number prefix ''Z'' over the number.

                         

                         

Persian Gulf Issue, One Rupee, bank Note, signed by A K Roy, 1959, Z Prefix.

                          

                           

Persian Gulf Note, 10 Rupees, bank Note signed by H.V.R. Iyengar. Z Prefix.

                          

                          

Persian Gulf Note, 5 Rupees bank Note, signed by H.V.R. Iyengar. Z Prefix.

                         

                          

Persian Gulf Note, 100 Rupees, bank Note signed by H.V.R. Iyengar. Z Prefix.

During the introduction of Gulf Rupee notes, the RBI observed that a significant amount of Indian Rupees were taken by Haj pilgrims to Saudi Arabia annually, which were returned to the RBI for conversion into pound sterling. To prevent any illegal return of Rupees through Saudi Arabian banks, the RBI introduced two special ''Haj Notes'' in denominations of 10 and 100 Rupees. These notes, not legal tenders in India, could be exchanged in Bombay for Indian Rupees or pounds Sterlings. The 10 Ruppe note was blue in colour and the 100 Rupee note was red. The word ''HAJ'' appeared on these notes and the serial number that was prefixed with the letters ''HA''.

                         

                          

HAJ Pilgrim Issue Note ''Specimen'', signed by H.V.R Iyengar, Imaged by Heritage Auctions, HA.com. HAJ written on the left of Reserve Bank of India.

                          

HAJ Pilgrim Issue 100 Rupee Note, signed by H.V.R Iyengar, HAJ written on the left of Reserve Bank of India. Serial no HA.

In 1966, the Indian Rupee was devalued by nearly 57 percent. This led to replacing Indian rupees with Saudi Riyals or Bahraini Dinars in most states by the end of 1966. The Gulf Rupees and Haj notes were eventually withdrawn from circulation.

Today, these notes are highly sought after by collectors in both India and Gulf States.