The woman, a journalism student, was arrested on Wednesday by the Crime Branch here and has been remanded in 14-day police custody, a senior official said.
"The 21-year-old journalism student was arrested on January 24 while accepting an amount of Rs five lakh from the Congress MLA from Ater (Bhind) Hemant Katare," Additional Superintendent of Police (ASP) Rashmi Mishra said.
Mishra said the MLA had complained to the police that the accused was calling him regularly since January 17, threatening to frame him in a rape case unless he paid Rs two crore to settle the matter.
Soon police laid a trap with the MLA "promising" to pay Rs 25 lakh to the woman, who was arrested when she collected the first instalment of Rs 5 lakh, the ASP said.
MLA Katare said the woman, posing as a journalist, had met him a couple of times at different public programmes.
"Later, she posted a video on social media. Afterwards, her associate Vikramjit Singh met me and demand Rs two crore to settle the matter," he said.
On Wednesday, the police arrested her red-handed, he said.
ASP Mishra said Singh was the woman's aide is absconding and a search was underway to nab him.
The accused has been booked under IPC sections 348 (wrongful confinement to extort confession), 388 (extortion by threat of accusation of an offence punishable with death or imprisonment for life) and 120B (criminal conspiracy), the police said.
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