Arrow keys in Putty returning ^[[A ^[[D ^[[B instead of moving the cursor

In my experience that's because "bash" is not running. Simply run "/bin/bash" to enjoy colors, history and more.

I've found that specifying "The Function Keys and Keypad" option to match your operating system resolves many issues.

[Putty]

Terminal -> Keyboard --> RadioButton "Linux"

(if you're using Linux) and then you can start your session

You could try changing the 'Application Cursor Keys' mode. It's in the Terminal->Keyboard subsection of the initial configuration window (these settings may potenitally be overridden by your server).

http://the.earth.li/~sgtatham/putty/0.55/htmldoc/Chapter4.html#S4.4.4