The 79-year-old minister submitted his resignation to Chief Minister Shivraj Singh Chouhan, who forwarded it to state Governor Ram Naresh Yadav for acceptance, official sources said.
Chouhan is learnt to have asked Raghavji to resign after an obscene CD purportedly featuring him surfaced and the minister's servant filed a police complaint Thursday against him alleging that he was being sexually exploited.
Raghavji had set a record by presenting the state budget for 10 years in succession from 2004 to 2013.
The sources said that Chouhan has asked Water Resources Minister Jayant Malaiyya to look after the finance portfolio.
Describing the incident as unfortunate, Leader of Opposition in Madhya Pradesh Assembly Ajay Singh said that in politics "moral corruption" was a much worse thing than corruption.