Schools and businesses were shut in the Nepali capital in a protest over the killing of a businessman by Maoist rebels, police and witnesses said.

Ram Hari Shrestha, a restaurant owner, was abducted and killed in southern Nepal earlier this month. Maoists said some of their members killed him, but they were not acting on the party's orders. They have vowed to bring the culprits to justice.

"The government must investigate the killing and punish the culprits," Shrestha's wife Ramila said. "The Maoists must publicly apologise."

Shrestha's family and local residents called for a day's strike which was backed by the main political parties.

The killing came a month after the former rebels emerged as the biggest group in elections held last month for a special assembly. They are trying to head a new government.

The assembly is due to hold its first meeting next week and is expected to declare an end to the centuries-old monarchy, a major condition of the 2006 peace deal ending a decade-long civil war.

Main political parties in the Himalayan kingdom accuse the Maoists of continuing violence and intimidation despite joining electoral politics.