Mallya had fled India on March 2, 2016 for evading a consortium of Indian banks who were seeking to recover over Rs 9,000 crore which his now defunct Kingfisher Airline owed them in loans.
The British government had last month certified India's request for Mallya's extradition and forwarded it to a district judge for further action.
The liquor baron was arrested at 9.30 am London local time and produced in the Westminster court. CBI has reportedly been informed bout Mallya's arrest by the British authorities.
A Delhi court had last week issued an open-ended non-bailable warrant (NBW) against Mallya in a case of alleged violation of Foreign Exchange Regulation Act (FERA).
The Ministry of Home Affairs has already directed the CBI and ED to seek 61-year-old Mallya's extradition in the IDBI bank loan fraud case.
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