This is the first time that the SFIO has arrested a person for fraudulent activities, a senior official told PTI.
Singal was arrested in the national capital and has been sent to judicial custody till August 14, the official added.
The probe agency, which comes under the Corporate Affairs Ministry, got powers to arrest people for violations of companies law last year.
The finance ministry said Singal is "accused to be guilty of siphoning off funds of over Rs 20 billion from the loans availed by Bhushan Steel Limited using more than 80 companies".
The companies were used for fraudulent activities of rotation of funds through bogus loans and advances, and investments, among others, it said in a tweet.
In another tweet, the ministry said fraudulent activities contributed to the company becoming insolvent.
"Bhushan Steel Limited is one of the 12 big cases that had been referred for insolvency resolution by banks. Tata Group has taken-over management of the company from the Singals. SFIO investigation is on-going," it said.