Critical Reasoning — Assumptions Statement: “The Reserve Bank of India has directed banks to refuse fresh loans to major defaulters.” Which assumptions are implicit?

Introduction / Context:
The directive aims to change bank–borrower behavior by denying new credit to major defaulters. We must spot the necessary assumptions underlying this directive.

Given Data / Assumptions:

• I: The banks may still give loans to the defaulters.
• II: The defaulters may repay the earlier loan to get a fresh loan.
• III: The banks may recover the bad loans through such harsh measures.

Concept / Approach:
Policy directions typically assume a causal mechanism (pressure leads to repayment) and an intended outcome (recovery). They need not assume existing bank misconduct; directing “refusal” is to prevent or remove the incentive for repeat credit without repayment.

Step-by-Step Solution:
1) II is implicit: The pressure tactic works only if defaulters are motivated to regularize dues to regain access to credit.2) III is implicit: The RBI intends to reduce bad loans; if recovery were not expected, the measure would lack purpose.3) I is not necessary. The directive can be preventive or harmonizing; it does not require that banks would otherwise certainly approve such loans, only that refusing them is now mandated.

Verification / Alternative check:
If II and III fail, the measure would not achieve RBI’s aims, undermining the rationale for the directive.

Why Other Options Are Wrong:

• Only I and II / All: include I, which is not required.
• None / None of these: overlook the pressure–recovery logic (II and III).

Common Pitfalls:
Do not equate “direction issued” with proof that banks intended to keep lending to defaulters.

Final Answer:
Only II and III are implicit