RBI to set up working group for agricultural loan issues

(Reuters) - The Reserve Bank of India on Thursday said it would set up an internal working group to examine issues pertaining to agricultural loans, including regional disparity and extent of coverage.

The central bank also raised the limit for collateral-free farm loans to 160,000 rupees from the current 100,000 rupees, in view of overall inflation and a rise in agriculture input costs.

The move comes days after India's government pledged 750 billion rupees ($10.50 billion) to support poor farmers and reduced the tax burden for the middle class, as it looked to rally support from voters with the final budget before a general election.

The RBI unexpectedly lowered interest rates on Thursday and shifted its stance to "neutral" from "calibrated tightening" to boost a slowing economy after a sharp fall in the inflation rate.

($1 = 71.4510 Indian rupees)

(Reporting by Chris Thomas in Bengaluru; Editing by Shreejay Sinha)