Nepal's police have arrested an Indian man suspected of being the mastermind of an illegal kidney transplant racket in India that may have duped or forced at gunpoint hundreds of poor labourers into donating their organs.

The racket, first uncovered last month in the booming IT city of Gurgaon outside New Delhi, was one of the largest transplant rings reported in India for years and led to calls for the government to stop a booming trade in backstreet operations.

Amit Kumar was arrested at a resort in Chitwan National Park, 80 km (50 miles) southwest of Kathmandu on Thursday evening. Chitwan is popular among foreign tourists for jungle safaris and wildlife watching.

Indian media said he aroused suspicions of a hotel employee when he cut out a news article about the kidney racket from a newspaper.

"He was sitting in the lobby of the hotel from where we arrested him," police officer Kiran Gautam said from Hetauda, the biggest town in the region.

"He did not resist being arrested," Gautam said.

Kidney failure has become more common in rich countries, often because of obesity, and a shortage of transplant organs has fuelled a black market that exploits needy donors.

At least five foreigners - two U.S. and three Greek citizens - were found last month in a luxury guesthouse in Gurgaon which was part of the racket, police said.

Some people were paid around 50,000 rupees (642 pounds) for their kidneys. They were sold to wealthy clients for 10 times as much, according to police.

Suspicious neighbours said they had noticed blood running out of the house's gutters, as well as blood-soaked bandages and even bits of flesh thrown into an open plot near the house in Gurgaon, according to Indian media.

Kumar, wearing a black jacket and woolen scarf was later paraded briefly in front of dozens of journalists at the city police headquarters in Kathmandu on Friday.

"I am innocent," he told reporters.

It was not immediately clear how or when Kumar will be deported to India.

But police officer Upendra Kant Aryal said he could be charged in Nepal for illegally carrying large amounts of dollars, euros and Indian rupees, a charge that could fetch up to four years in jail.

Aryal said police were also investigating if he was involved in organ transplants in Nepal.