A New Zealand man behind bars in Bali after allegedly being caught with 3.84 grams of cocaine does not have a criminal background and has never been to jail before, a relative says.

Willie Rare - who changed his name to Angus McGaskill, an old family name, after moving to Melbourne - was arrested by Indonesian police last Wednesday.

The 57-year-old former Gisborne man had been living in Seminyak, an upmarket district north of Bali's Kuta Beach, for several months.

Police followed him into Pepito supermarket in Tuban near Bali's international airport on the southern end of the island, where they allegedly found the cocaine in five packets inside his wallet.

Police took sniffer dogs to search his villa in nearby Seminyak but did not find more drugs.

They are yet to decide whether to charge him and are holding him in jail for further interrogation. If charged and convicted, he will serve a minimum four-year prison sentence and possibly up to 12 years.

Members of the Gisborne community recognised him from media coverage as Willie Rare, who worked as a cellarhand for Montana Wines before leaving Gisborne for Australia many years ago.

Many of his friends were this morning hoping he would be deported from Indonesia back to New Zealand, where he was born and bred.

His uncle Eddie Rare said members of the family here had not been notified of his arrest but had recognised his photographs in media.

Another family member said Mr Rare did not have a criminal background and had never been in jail. He was well-educated, and had been successful in business in Australia.

The family member said they had been told Mr Rare had been sold the cocaine by an undercover Balinese police officer while having a good time with his friends at a party.

He loved having a good time and being with people, and had been really enjoying his life in Bali before this happened.

Family members were this morning communicating among themselves, trying to find out how they could help him.

Although the quantity of cocaine was relatively small, the case has sparked intense media interest in Australia because of the high-profile case of Australian Schapelle Corby, who was convicted and sentenced to jail in 2005 for drug smuggling. She is serving a 20-year term in Kerobokan Prison, Bali.

At a news conference yesterday, Mr Rare tried to cover his head to hide his face.

He told reporters he had made a "silly mistake" and said he had used the drug for the first time the day before he was arrested.

"I'm very, very sorry," he said.

He told reporters he had been watching the World Cup and had drunk a lot.

"I was very, very drunk," he said on television reports last night.

- NZPA