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The government has held internal preliminary discussions over a possible infusion of fresh capital in debt-laden IDBI by Life Insurance Corporation of India (LIC) but no decision has been taken on selling its stake in the bank to the insurer, said a senior official. LIC would use that amount to capitalize the bank to maintain its capital adequacy ratio. It would not be a stake sale by government. The government is expected to hold discussions with banking, insurance and market regulators before taking a final call.  Which of the following can be logically deduced from the statement above?

The government has held internal preliminary discussions over a possible infusion of fresh capital in debt-laden IDBI by Life Insurance Corporation of India (LIC) but no decision has been taken on selling its stake in the bank to the insurer, said a senior official. LIC would use that amount to capitalize the bank to maintain its capital adequacy ratio. It would not be a stake sale by government. The government is expected to hold discussions with banking, insurance and market regulators before taking a final call.  Which of the following can be logically deduced from the statement above? Correct Answer IDBI will need more capital infusion and LIC can put that money towards further strengthening the bank. The government may hold informal consultations with Reserve Bank of India (RBI) , Insurance Regulatory and Development Authority of India (Irda) and market regulator Securities and Exchange Board of India (Sebi) .

The correct answer is option 1, i.e. IDBI will need more capital infusion and LIC can put that money towards further strengthening the bank. The government may hold informal consultations with Reserve Bank of India (RBI) , Insurance Regulatory and Development Authority of India (Irda) and market regulator Securities and Exchange Board of India (Sebi).

Options (2) and (4) are perfectly irrelevant and can be rejected on first reading as we cannot infer anything which is not mentioned in the above given statement. No mention regarding Axis Bank has been made and thus, we cannot infer both the option choices. Moreover, as far as (3) is concerned, we cannot infer that the insurer (LIC) has a 10.82% stake in IDBI Bank as there is no mention of it regarding the same. The statement is about the infusion of the two but the stake of one in other is no where mentioned and as we know that we cannot infer anything that is not mentioned. Option (1) is the most appropriate deduction based on the given statement as it highlights the fact that the contribution of LIC might improve IDBI’s performance and also deals with the government expecting to hold the decision.

As (1) captures the essence of the statement in the most appropriate manner and is thus, the most appropriate answer choice.

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