A woman and two men were killed in West Bengal's bustling Siliguri town on Thursday, when the bomb went off inside a house due to a faulty timer device.

India also tightened security along its border with Nepal to thwart possible attempts by militant groups to sneak into the Himalayan nation, which holds an election next week, officers said.

Police believe the three Nepali-speaking people arrested were associates of those killed in Thursday's blast and that the bomb was probably heading towards neighbouring Bhutan or Nepal, Rahul Srivastava, a senior police officer said from Siliguri.

"The bomb would have killed many people and we are still tracing its connection with the two neighbouring countries," Srivastava said in a telephonic interview on Friday.

Bhutan, which embraced democracy last week, has accused thousands of refugees of ethnic Nepali origin who were expelled or fled Buddhist Bhutan since 1991 of using Indian soil to sneak into Bhutan.

The refugees have been living in poor and crowded camps in eastern Nepal, bordering West Bengal, and say they want to go back to Bhutan. A series of small bombings in the run-up to last week's election were blamed on exiled Nepali groups.

"Some of the leads we are working on point towards the Bhutanese refugees," Ravinder Jeet Singh Nalwa, a top police officer, said from Siliguri.

On the other hand, Madhesi rebel groups from the nearby Terai region of Nepal, who are demanding more rights and boycotting next week's elections there, are also suspected of taking shelter in Indian border towns.

The Madhesis dominate the Terai, a narrow strip of fertile plains considered to be impoverished Nepal's food basket and home to nearly half of its 26 million people.