Majid Khan Bismillah Khan was arrested from a house in Indiranagar which was raided after receiving a tip-off, said Commissioner of Police Yashaswi Yadav.
Addressing a media conference here, Yadav said during the raid fake notes with a face value of Rs 5 lakh were seized.
The counterfeit notes were in denominations of Rs 2,000, Rs 500 and Rs 100 and were of high quality, he said.
Police seized a scanner, computer and some electronic devices, Yadav said, adding genuine notes of Rs 23,000 were also found in the house.
He declared a reward of Rs 20,000 for the police team that conducted the raid and made the seizures.