Rao is accused of threatening a businessman who had a monetary dispute with a developer.
"The court has granted bail to Ravi Mallesh Bora alias D K Rao," said an officer of the Mumbai police's crime branch.
Rao's lawyer Ajay Dubey said the Esplanade court in south Mumbai granted his client bail on the ground that the trial was not yet over though Rao had already spent half of the maximum sentence prescribed for the offence in the prison.
However, Rao will not walk out of the jail immediately as the Bombay High Court is hearing his bail application in the case of firing outside the residence of fugitive don Dawood Ibrahim's brother Iqbal Kaskar in 2011. Kaskar's bodyguard-cum-driver was killed in the firing.