NEW DELHI (Reuters) - Indian authorities arrested a former managing director of Bhushan Steel Ltd on Thursday over an alleged fraud, after a probe found billions of rupees had been siphoned off by the firm’s founders from funds borrowed from state-run banks.

Neeraj Singhal, a member of the founding family, was presented before a court and will be held in judicial custody until Aug. 14, the Ministry of Corporate Affairs said in a statement.

It is fairly rare for influential industrialists or corporate leaders to be arrested over fraud allegations in India, but efforts to clean up state banks’ bad loans has put more scrutiny on their financial transactions.

Bhushan Steel was among a dozen companies pushed to bankruptcy court last year amid a government drive to whittle down a $150 billion mountain of bad loans choking credit at Indian banks.

The company, which owed more than $8 billion to creditors, was taken over in May by Tata Steel in a more than $5 billion deal.

Singhal was indicted for “indulging in serious corporate fraud punishable” under law, the Ministry of Corporate Affairs, said.

The government alleged that the founders of Bhushan Steel had used a “multitude of complex, fraudulent maneuvers to divert/siphon-off funds” amounting to billions of rupees that had been borrowed from state-run banks, causing losses to both banks and investors.

“Another blow to Crony capitalism. No mercy for siphoning off public money,” Rajeev Kumar, the government’s top bureaucrat overseeing the country’s banking sector, said in a Twitter post.