According to eye witness, the incident took place when the bus driver, who was talking on his mobile phone, lost control of the vehicle and it fell into the canal.
Two bodies have been fished out and the toll is likely to go up further, police said.
Efforts are underway to pull out the bus from the canal, they said adding, divers have been deployed to conduct a search operation.
The driver and conductor of the bus escaped soon after the incident.
