History
In the beginning to the middle of the 20th century, the Indian rupee was extensively used as currency in the countries of the Gulf and Arabian Peninsula. To reduce the strain put on India's foreign reserves by gold smuggling caused by this external use of the rupee, a separate currency was created. The Gulf rupee was introduced by the Indian government in 1959 as a replacement for the Indian rupee, for circulation exclusively outside the country. At the time, the Indian rupee was pegged to the British pound at a rate of 13⅓ rupees = 1 pound.
Two states, Kuwait and Bahrain, replaced the Gulf rupee with their own currencies (the Kuwaiti dinar and the Bahraini dinar) after gaining independence from Britain in 1961 and 1965, respectively. However, even today, in Bahrain 100 fils (one tenth of a Bahraini dinar) are referred to in Arabic as a "rupee" or "rubiya" (Arabic: ربية) in common parlance.
On 6 June 1966, India devalued the rupee. To avoid following this devaluation, several of the states using the rupee adopted their own currencies. Qatar and most of the Trucial States adopted the Qatar and Dubai riyal, while Abu Dhabi adopted the Bahraini dinar. Only Oman continued to use the Gulf rupee, until 1970, with the government backing the currency at its old peg to the pound. Oman replaced the Gulf rupee with its own rial in 1970.
Read more about this topic: Gulf Rupee
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