The BSF had spotted two men entering the Indian territory by scaling the barbed wire fence in Malda Frontier last night.
On being challenged one of them escaped, another was arrested, they said.
Fake currency with a face value of Rs 20 lakh was seized from the possession of the man, identified as Kasheb Sheikh.
The fake notes were of the denomination of Rs 500 and Rs 1000 respectively, they said.
Sheikh and his accomplice are residents of a Bangladesh village near the Indo-Bangla border.
B D Sharma, Additional Director-General (East), BSF, had recently said that Malda district was becoming a hub for smuggling fake Indian currency notes.
In 2011, 44 Indians and 13 from Bangladesh were arrested by the BSF for smuggling fake notes, while in the first eight months of this year altogether 46 people, including 18 Bangladeshis, were caught.
Explaining the modus operandi, Sharma had said smugglers often throw the bundle of fake notes over the fence during night, besides infiltrating the porous border.