The two men ware detained a week ago after Bank Artha Graha lodged a complaint with the police claiming criminal deception in a $1.3m software development project.

Chief executive Arun Jain and another senior official were detained when they went to the Indonesian bank's offices to investigate the termination of a contract.

Their release follows a phone call from India's Foreign Minister Yaswant Sinha to his Indonesian counterpart Hassan Wirayuda.

'Private matter'

"So far as Indonesia is concerned, we see this as a purely private contractual matter," said Marty Natalegawa, spokesman for the Indonesian foreign ministry.

It was not clear if Mr Jain and senior vice-president Rajiv Malhotra would be required to stay in Indonesia while police investigated the complaint.

Polaris, a financial services software firm, started as a subcontractor developing software for Citigroup's Indian operations, which is still one of its largest clients.

Citigroup will hold just over 47% of Polaris when it is merged with its Indian software unit, Orbitech Solutions.