Two of the hostages taken by a gunman in the Southern French city of Toulouse have been released.

More than four hours into the siege, police said a woman hostage had been freed in exchange for food and water. A second woman was reportedly released some time afterwards.

Officials say the gunman first demanded money. When he was refused, a shot was fired and hostages taken, BBC informs.

The gunman, aged 26, has been described as a "schizophrenic" by the local authorities, according to The Telegraph.

The man, who has claimed to be an al-Qaeda militant, has demanded to speak to the Raid elite police unit that shot Islamist gunman Mohamed Merah.

The bank is 100 metres (330ft) from Merah's flat.

In March, the Raid police force led a 32-hour standoff with Merah, whom police say was behind the shootings of three Jewish schoolchildren, a rabbi and three paratroopers.

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