Dominic Selvaraj allegedly drove off with the van six days ago while his colleague was using the toilet.
He was arrested on Wednesday morning while returning to Bangalore from neighbouring Tamil Nadu, police said.
ATMs have seen long lines since India banned 500 and 1,000 rupee notes.
The government said that the ban was part of an effort to crack down on corruption and force those with undeclared wealth out into the open.
A police official told Hindi's Imran Qureshi that they have only managed to recover 7.9m rupees from the amount that was stolen.
"He has told the police that he used the rest of the money to repay his debts and give out a loan to a friend. In any case, we are investigating," he said.
Mr Selvaraj had been hired as a driver three weeks ago by a firm that transfers cash between ATMs and banks.
The van he was driving did not have a GPS facility, which Mr Selvaraj had been aware of, police said.
There have been chaotic scenes in India ever since the currency ban was announced two weeks ago.
It has brought India's largely cash economy to a virtual standstill as the two banned notes accounted for 86% of the money in circulation.
The legislature has presented new 500 and 2,000 rupee notes, yet these are still during the time spent being infused into the economy and banks frequently come up short on the new cash.
Individuals have been told they can store or change their old notes in banks until 30 December.
Head administrator Narendra Modi, who made the amaze declaration in a deliver to the country, said the choice was made to target individuals who have crowds of unaccounted money, referred to in India as "dark cash".