Police officials said the man went to the jewellery shop and put two bangles in his bag.
As the shop owner asked for money, Saiful showed the bomb-like object and tried to flee, threatening to explode it, police said.
Street vendors later caught him and handed him over to police.
Bomb disposal unit of Dhaka Metropolitan Police later went there and discarded the object after making sure it was not a bomb, Atiqul Islam, Additional Deputy Commissioner (DB-Motijheel) of Dhaka Metropolitan Police, said.
Police recovered chili powder and a mobile phone from his possession. In primary interrogation, Saiful told police that he wanted to mug the ornaments and his aim was to throw the chili powder and flee, the ADC said.