AFP/Bali

An alleged Indian crime boss wanted in his home country for up to 20 murders has been arrested in Indonesia after two decades on the run, police said Monday.

Acting on a tip-off from Australian police, Indonesian authorities detained Rajendra Sadashiv Nikalje on Sunday as he arrived in the popular resort island of Bali from Sydney, Bali police spokesman Heri Wiyanto told AFP.

The 55-year-old Nikalje, known in India as Chhota Rajan, had been evading police in several countries for years, with Interpol flagging him as a wanted man back in 1995.

"We received information from police in Canberra yesterday (Sunday) about the red notice for a murderer," Wiyanto told AFP.

"We arrested the man at the airport yesterday. What we know is that this man was suspected to have carried out 15 to 20 murders in India."

Nikalje was the alleged former right-hand man of Mumbai crime kingpin Dawood Ibrahim, who is suspected of being behind the 1993 bomb blasts in the city that killed more than 250 people.

Nikalje later became Ibrahim's rival, accused of running one of several underworld outfits that had a grip on India's financial and entertainment capital in the 1980s and 1990s until a police crackdown.

"It (the arrest) is very, very important because after Dawood's gang, his was the second most notorious and cruel gang," former Mumbai police chief P.S Pasricha told an Indian TV station.

"People were so scared that they stopped even holding their marriages in Mumbai or purchasing expensive cars because the moment they did, they would get calls from gangsters for extortion."

Among other crimes, police accused Nikalje in 2011 of ordering the murder of a prominent Mumbai crime reporter, who was gunned down in a drive-by shooting the same year.

Wiyanto said Bali police were coordinating with Interpol and Indian authorities, adding it was likely Nikalje would be deported to India.

A spokesperson for Australian Federal Police said Interpol in Canberra had alerted Indonesian authorities "who apprehended Nikalje at the request of Indian authorities".

The federal police confirmed last month that Nikalje was living in Australia under another identity and had been in discussions with Indian authorities, the spokesperson said, but would not provide further details.

Nikalje in 2001 was wounded by gunmen who burst into a Bangkok apartment and killed his associate in what appeared to be a shooting ordered by Ibrahim.

Because he was facing a bid to extradite him to India, he made a dramatic escape from the Bangkok hospital where he was being treated.

India's top Central Bureau of Investigation welcomed the arrest on Monday, saying it had been working with Australia authorities to hunt down Nikalje.

Interpol's website says Nikalje was born in Mumbai, and was wanted for multiple charges including murder and possession and use of illegal firearms.