With a single stroke, the government has made over 3.5 crore existing post office accounts ready for its new Aadhaar-linked cash transfer scheme.

The accounts, which belong to MGNREGA workers over the country, were originally to be used only for receiving wages under the rural employment guarantee scheme. However, the government has now woken up to the potential of using the ready-made network of accounts to directly transfer benefits such as pensions, scholarships and social welfare payments.

Last month, Rural Development Minister Jairam Ramesh wrote to Finance Minister P. Chidambaram bemoaning the fact that due to an August 2008 notification, “No deposit other than NREGA wage can be made in these accounts.”

In his letter to the Finance Minister, Mr. Ramesh said: “This, you will agree, defeats the very purpose of the direct benefits transfer initiative launched by our government recently and described by you as a ‘gamechanger’.”

The Finance Ministry promptly responded by amending its notification to allow MGNREGA beneficiaries to now receive other “government benefits and deposits” in their post office savings accounts. The Department of Posts has also been notified about the changes.

Under the new cash or direct benefit transfer initiative, the Aadhaar number will be used to authenticate the identities of beneficiaries, who will then receive their government benefits directly into their accounts. This requires all beneficiaries to open bank or post office accounts, which will then have to be seeded with their Aadhaar numbers.

With MGNREGA already launching its own initiative to link its payments with Aadhaar, it would speed up the process and prevent duplication of work to allow the existing accounts to be used for the cash transfer scheme as well.

Of the 8.26 crore MGNREGA accounts in the country, 43 per cent — or 3.5 crore — are post office accounts, while the remainder are bank accounts. States like Bihar, Jharkhand, Gujarat and Maharashtra have an especially high percentage of MGNREGA workers using post office accounts, and are likely to benefit from this move once the cash transfer scheme comes into full swing.


  • The accounts were originally to be used only for receiving wages

  • Of the 8.26 crore MGNREGA accounts, 43 per cent are post office accounts