Three persons were on Thursday arrested for allegedly trying to dispose demonetised currency and obtain new notes in exchange.
Police added that Rs 1 crore in demonetised notes was recovered from the arrested persons.
A police release stated that businessman Kallam Rajesh (45) was unable to exchange the demonetised currency during the time such an exchange window was being operated by the authorities.
He then approached another businessman Palamkula Anantha Reddy seeking help in exchanging the demonetised currency, police said.
Police said that Rajesh, Reddy and one Ashangari Nagaraju conspired to exchange the old notes for new notes worth 20 per cent of the former's value.
"The three persons came to Karkhana area as part of this plan and were arrested today on the basis of specific information," an official said.
A case has been registered and further investigations were underway, police added.