DHAKA (AFP, REUTERS) - Relatives of foreign hostages murdered in a Bangladeshi restaurant were in Dhaka Monday (July 4) to take their loved ones' bodies home as authorities made the first arrests over the killings.

Many were in tears as Prime Minister Sheikh Hasina laid wreaths on the coffins of those killed in the siege at an upmarket cafe in the capital, by far the deadliest in a spate of recent attacks that have caused international alarm.

They included nine Italians, seven Japanese, a US citizen and a 19-year-old Indian student.

Witnesses say the perpetrators of the attack, which the Islamic State in Iraq and Syria (ISIS) group has claimed, spared the lives of Muslims while herding foreigners to their deaths, killing many with machete-style weapons.

Among the mourners at the ceremony in a Dhaka stadium was Muksedur Rahman who described slain Italian textile trader Nadia Benedetti as a "great human being" who had worked to help Bangladeshi survivors of acid attacks.

"Nadia Benedetti had been working in Bangladesh for more than 20 years," Rahman, a colleague of the Italian, told AFP. "I can't believe she had to die like this. We have to stand against such terrorism right now."

Italy's ambassador said Friday night's attack on the Holey Artisan Bakery cafe was "unprecedented" and promised his country's full support in tackling a rise in Islamist militancy in Bangladesh.

"This unprecedented attack is also an attack on the very identity of Bangladesh," Mario Palma told reporters at the ceremony. "You deserve all the cooperation from your friends all over the world who supported you for your struggle to achieve independence."

The government said the bodies of the Italians and Japanese victims would be handed over to diplomats later Monday before being flown home.

The Indian student's body was also being flown back to her home town later on Monday.

US Secretary of State John Kerry offered Washington's support in a telephone call to Hasina, whose government has been unable to stop a wave of Islamist attacks on foreigners and religious minorities in officially secular but mostly Muslim Bangladesh.

"(Kerry) encouraged the government of Bangladesh to conduct its investigation in accordance with the highest international standards and offered immediate assistance from US law enforcement, including the FBI," said his spokesman John Kirby.

Six suspected militants were killed by commandos in the final stages of the siege, but one was taken alive and interrogated by Bangladeshi intelligence.

Bangladesh's national police chief told reporters on Monday that the captured gunman was one of two people who have now been formally arrested over the hostage siege.

"Two people are in custody. We'll file a case. We'll know their identities after they are remanded and questioned," Police Inspector General Shahidul Hoque said.

The government has repeatedly denied international terror networks have a presence in Bangladesh, though the ISIS-linked news agency Amaq published extensive details of Friday's attack, including photos from inside the cafe.

Bangladeshi officials said on Monday they are trying to confirm the names of the Islamist militants who carried out the attack and checking whether the identification of some of them by friends on social media is correct.

Posts on Facebook had identified three of the five, whose grinning images appeared in front of a black flag, as Nibras Islam, Rohan Imtiaz and Meer Saameh Mubasheer.

Police have said all six gunmen killed were locals and five were on a government militant watchlist. But they also said they were holding off before confirming their identities.

Whoever was responsible, Friday's attack marked a major escalation in scale and brutality by militants demanding Islamic rule in Bangladesh, whose 160 million people are mostly Muslim.

Some of the men went to an elite public school in Dhaka known as Scholastic, and then college at North South University in the capital and Monash University in Malaysia, according to the posts.

Masudur Rahman, deputy police commissioner of Dhaka police, said officers were probing those links. "A majority of the boys who attacked the restaurant came from very good educational institutions. Some went to sophisticated schools. Their families are relatively well-to-do people," Bangladeshi Information Minister Hasanul Haq Inu told India's NDTV.

Police arrested a seventh man at the restaurant who they suspect played a role in the attack. He is currently in hospital.

Home minister Asaduzzaman Khan told AFP on Sunday the attackers were members of the Jamaeytul Mujahdeen Bangladesh (JMB), a local Islamist group banned by the government.

He said there were cases against all of them, but denied any intelligence failures ahead of the assault on the cafe, which came after a major crackdown that saw around 11,000 people arrested, some of them known Islamist extremists.

The plan is to look for family members of the gunmen, conduct DNA tests and investigate their links to international groups, Rahman said.

Analysts say the government is wary of acknowledging such groups are operating in Bangladesh for fear it could frighten off foreign investors.
But it has been criticised for failing to tackle a rise in Islamist attacks.

Earlier the transport minister Obaidul Quader said six of the Japanese killed were consultants for Bangladesh capital's first metro rail, and expressed hope Tokyo's foreign aid agency would continue its support for the three billion dollar project.

"Japan knows that this attack was part of the global terrorist activities. I hope they'll understand the reality," he said. "There is no question of stopping this project."

Meanwhile, Bangladesh's US$26 billion (S$35 billion) garment industry is braced for the fallout from the killings, fearing major retailers from Uniqlo to Marks and Spencer and Gap Inc could rethink their investment.

Japan's Fast Retailing Co, owner of the Uniqlo casual-wear brand, will suspend all but critical travel to Bangladesh and has told staff there to stay home.