A man in his mid-40s was arrested on Thursday on charges of duping a nationalised bank of Rs 5.5 crore.

Praveen Kumar Agarwal had allegedly appropriated the amount by submitting eight forged letters of credit, which he claimed were issued by two branches of another bank.

An accomplice of Agarwal, too, is in the net. Sleuths are looking for three others allegedly involved in the racket.

During interrogation, Agarwal revealed that he had set up a mustard oil manufacturing unit in Barasat and purchased a flat there. He also took a loan of Rs 40 lakh from Federal Bank and repaid it from the defalcated amount.

Jawed Shamim, the deputy commissioner of police, detective department, said Agarwal, a resident of Salt Lake, and his accomplice, Suman Biswas, were arrested from Park Street on Thursday afternoon by officers of the bank fraud section.

Police said Agarwal and his associates submitted the “letters of credit” to Indian Overseas Bank (IOB), Shakespeare Sarani branch, claiming that the Salt Lake and Rash Behari Avenue branches of Karnataka Bank had issued them.

Agarwal said in the forged letters that he had deposited the amount with the two branches of Karnataka Bank and wished to set up a factory. He said that he wanted to operate through the IOB because of its convenient location.

The fraud came to light when the IOB authorities contacted the Karnataka Bank. “They told us that the letters of credit were not issued by the managers of the two branches. We received a complaint from the IOB four days ago and officers swung into action,” said Shamim.

Sleuths raided Agarwal’s house in Salt Lake, but didn’t find him there. “We received a tip-off that he would visit a restaurant on Park Street and a trap was laid. Agarwal and Biswas were caught as soon as they turned up,” said an officer.

The police are also not ruling out the possibility of bank officials being involved in the fraud. “We were stunned to know that the bank had issued such a huge amount without verifying the letters of credit and are probing this angle too,” said Shamim.