"K. Michael, a Senior Special Assistant in the Issue Department of RBI's regional office, has been arrested for his alleged involvement in conversion of old Rs 500 and Rs 1,000 notes worth Rs 6 lakh into Rs 100 notes at the State Bank of Mysore's (SBM) Kollegal branch in Chamrajpet district," said the official on anonymity.
Kollegal is 145 km from Bengaluru in Karnataka's southwest region.
Michael's arrest comes a week after the CBI on December 6 registered a case against the bank branch's senior cashier Parashivamurthy for allegedly laundering Rs 1.51 crore of new currency in exchange for old currency after the government demonetised those on November 8.
"As the Kollegal branch is SBM's currency chest, large amounts of new notes in Rs 2,000 and Rs 500 were kept with lower-value notes for distribution to the bank's branches and state treasury offices in the district," pointed out the official.
Michael's name figured when CBI sleuths interrogated Parashivamurthy in the money laundering case.
"Coincidentally, Michael was at Kollegal on the day of demonetisation (November 8) to refill the currency chest with fresh stock and helped the bank's cashier convert the old notes for Rs 100 notes without proper documentation," said the official.
A special court here remanded Michael to six-day CBI custody for interrogation.