Rao had been threatening the complainant since last one year while he was extorting money from builders in the city, a senior official said.
Meanwhile, DCP, Detection, Dilip Sawant said Rao was arrested yesterday by Crime Branch sleuths who had put him under surveillance over a period of time.
"We had received a complaint from a person related to building construction business that Rao was demanding ransom from him and threatened him of dire consequences," he said.
Based on the complaint, a through probe was conducted into the matter before Rao's arrest.
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He was produced before court today, which remanded him in police custody till October 18.
Rao has over 2O cases registered against him in Mumbai region.
He had been acquitted in an extortion case only last year.