Indian police have arrested the chairman of the state-run Syndicate Bank over allegations he took bribes in exchange for loan extensions to private companies, a law enforcement official said Sunday.

The Central Bureau of Investigation (CBI) arrested Sudhir Kumar Jain in the southern city of Bangalore along with 11 others, including two directors of Delhi-based private firms, its spokeswoman said.

"We arrested him (Jain) late last night and he will be produced in court later today (Sunday)," the CBI's Kanchan Prasad told AFP.

The CBI, the country's top crime-fighting body, said it "laid a trap" and recovered five million rupees ($82,200) allegedly paid to Jain through middlemen by companies to win extensions on their loans.

The companies had been defaulting on loan repayments to the mid-sized bank amounting to tens of millions of rupees, the CBI said, adding that its investigation was ongoing.

A CBI statement said it had found "incriminating documents" related to the case after searching 20 places in four cities and had recovered cash, jewellery and property papers at Jain's residence.

The statement released late Saturday alleged Jain had given "undue favour to private companies by granting sanction to various financial proposals," both directly and through middlemen.

Jain's representatives could not be contacted for comment. In a similar case late last year, the CBI investigated a senior executive of India's top lender State Bank of India for allegedly taking bribes to sanction loans to a company.