Shivraj Puri, 32, who is expected to appear in court later, told an Indian newspaper he was innocent.
The alleged fraud was discovered earlier this month in a branch of the global bank in Gurgaon, a wealthy suburb of Delhi.
The bank has said duped investors were promised quick, high returns from a bogus financial scheme.
It is alleged that Mr Puri funnelled the money into accounts controlled by three relatives.
‘Truth will out’ Mr Puri reportedly handed himself in on Thursday, a day after police said he was wanted for questioning.
The accused told the Times of India newspaper after his arrest: “I have already given full details to the police. I have full faith in the judiciary. Truth will come out.”
The alleged fraud came to light earlier this month when a client mentioned the scheme to a senior bank manager.
Citibank has not publicly put a figure on the sums involved, but investigators have said at least $20m (£13m) was stolen.
According to a police complaint filed by Citibank, and seen by the BBC, funds were transferred suspiciously at the bank’s branch in the Delhi suburb from October 2009.