Police said the arrest was made after confessions of another gang member, who was arrested from near Howrah station on Sunday.
A large number of fake appointment letters, fake Railway stamps and letterheads and other documents were seized during searches here based on information from the gang member, who was lodged in jail following court orders on Monday.
The racket came to light following complaints made by a resident of Madhya Pradesh at the Golabari police station in Howrah city on February 19.
The gang had so far amassed over Rs 20 crore, they said.
The police said the modus operandi was to train the aspirants in railway stations and then give them 'postings'. The racketeers paid the youths 'salaries' for three months and then 'sacked' them on some pretext or the other.
The racketeer arrested today was taken to Howrah for further questioning, the police added.