I know about some types of snakes that live underground (burrowing) in India (the small worm snakes, the sheildtails or uropeltids, and the sand
boas). But I haven't heard about any proof of the huge undergound networks or their powers.
In religious literatures, there are many references to such serpents living underground or underwater, deep inside the lakes/rivers. For example, in
the story of young Krishna, once to save other animals from dying, he kills the poisonous serpent with many faces named Kaling/a living deep inside
the river yamuna.
From the article-link given by kyateLaBoca
"The Nagas also have an affinity with water, and the entrances to their underground palaces are often said to be hidden at the bottom of wells, deep
lakes and rivers."
Source: paranormal.about.com...
I grew up in India and out of all the reading kyateLaBoca provided, this is what I found familiar. According to some people in india, if you swim near
a deep river or a lake, these underground creatures might pull your legs and drown you. I don't remember what they called these creatures, many names
were given. Well, that scared me when my friends and I used to go in the river, but I never encountered any such creatures.
Many people still believe in them, although as far as I know there hasn't been any proof of these underground creatures or Nagas. I think there is a
possibility that they might actually exist, but they are just part of scarry stories until we find some real evidence!