A stampede-like situation prevailed at all the three post offices in the coastal town in East Godavari district as hundreds of people rushed to open savings accounts.
Attempts by postal officials to deny the rumours went in vain as people insisted that accounts in their names be opened, police said.
About 1,000 accounts were opened in few hours with each applicant paying Rs.50.
"I heard that money seized in the Gali Janardhana Reddy (mining baron and former Karnataka minister) and Jagan (YSR Congress party chief Y.S. Jaganmohan Reddy) cases and the money belonging to the Sathya Sai trust will be deposited in the accounts in the post offices," one of the applicant told a television channel.
Some residents said rumours were doing the rounds for the last four days that money seized in the illegal mining case involving the former Karnataka minister, illegal assets case of Jaganmohan Reddy and the cash of Sri Sathya Sai Central Trust will be distributed among people through post offices.
Police officials rushed to post offices to appeal to people not to believe the rumours. They said they were trying to trace those who spread the rumours.
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