(Recasts with higher toll, more violence)

SRINAGAR, India, July 24 (Reuters) - Five people, including two children and a woman, were killed on Thursday when suspected Muslim separatist militants threw a grenade at a crowded bus terminal in Indian Kashmir's main city, police said.

Another 22 civilians were wounded in the attack in the Batamaloo bus terminal in the heart of Srinagar, the summer capital of Jammu and Kashmir.

"It exploded with a powerful sound and we left our shops and ran for cover," said Mohammad Rajab, a witness.

Rebel violence has flared across the Himalayan region over the past week. More than a dozen people, including 10 soldiers, have been killed and scores wounded in explosions and shootouts.

Tens of thousands of people have been killed in Kashmir since a revolt against Indian rule broke out in 1989.

In a separate incident, suspected separatist guerrillas killed a former militant and three members of his family in an overnight shootout in Doda district of south Kashmir.

"It is an act of reprisal by the terrorists whose ranks (he) had deserted a few months ago," said senior police officer Raghubir Singh.

In Jammu, the winter capital of the troubled state, authorities imposed a curfew after a Hindu protester was reported to have committed suicide on Wednesday to protest against the government for backing down from transferring forest land to a Hindu shrine.

In the face of violent protests from Muslims, the government in the Muslim majority state reversed its decision last month and said it would not allow building of shelters for Hindu pilgrims. (Reporting by Sheikh Mushtaq and Ashok Pahalwan; Editing by Alistair Scrutton and Bappa Majumdar) (For the latest Reuters news on India see http://in.reuters.com, for blogs see http://blogs.reuters.com/in/)

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