Investigators are looking into allegations that Nirav Modi and his business partner Mehul Choksi were involved in defrauding India's second-largest state-run lender the Punjab National Bank (PNB) of 2.8 billion rupees ($43.8 million).
The Central Bureau of Investigation (CBI) said it arrested Hemant Bhat, a business associate of Modi, and two PNB officials -- former deputy manager Gokulnath Shetty and Manoj Kharat -- in Mumbai late Friday.
"All three arrests were made late last night. They will be produced in a special court sometime later today," a CBI spokesman told AFP, speaking on condition of anonymity.
The trio is suspected to have facilitated fraudulent lines of credit to companies linked to Modi and Choksi, the spokesman said.
Modi is worth $1.73 billion according to Forbes, placing him 85th on India's rich list.
The 47-year-old is the founder of Firestar Diamond and jeweller to top Hollywood stars including Kate Winslet and Naomi Watts.
His high-end eponymous Nirav Modi brand has stores in several of the world's major cities.
Friday's arrests came after a money laundering case was registered against Modi and a few others, including members of his family, Shetty and Kharat.
It followed a PNB complaint last month to the CBI that it had been defrauded of 2.8 billion rupees.
The bank announced earlier this week that it had also detected fraud of almost $1.8 billion at a single branch in Mumbai.
On Friday, New Delhi suspended the passports of Modi and Choksi amid reports they had left the country.
In a statement late Friday, India's central bank said it "has already undertaken a supervisory assessment of control systems in PNB and will take appropriate supervisory action".
The CBI has carried out raids on more properties connected to the pair and has contacted Interpol to track down Modi.
Modi, the third generation of his family to go into the diamond trade, has not commented on the allegations.