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People queue up outside an ATM in Bengaluru. (Representational Picture)IANS

The Central Bureau of Investigation (CBI) on Tuesday arrested a senior official of the Reserve Bank of India in Bengaluru for his alleged involvement in the conversion of black money into white.

According to reports, K Micheal, senior special assistant in RBI, was allegedly involved in helping out black money hoarders to change Rs 1.5 crore of old notes into new currencies.

Seven people, including a hawala operator, were also arrested in the city as part of a racket that converted black money in banned Rs 500 and Rs 1000 notes into new Rs 2000 currency notes.

Amid ongoing cash crunch, investigative agencies are conducting nationwide search and seizure operations to unearth unethical links between black money hoarders and banking sector officials for the past few days.

More than a dozen banking officials have already been arrested by various investigative agencies after demonetisation for their alleged involvement in the conversion of old currency notes.

However, the arrest of a RBI official has added a new twist to the story as officials of the regulator has been assigned to oversee smooth implementation of government's demonetisation move.

After the note ban, people have been queueing up outside banks and ATMs on the back of ongoing cash crunch in the system. However, investigative agencies have arrested many black money hoarders and middlemen with bundles of new Rs 2000 notes, reflecting nexus between bank officials and hoarders.