As the defaults in the IL&FS group fuelled speculation of a broader debt crisis in the financial sector, the government and Reserve Bank of India (RBI) went into a huddle here on Tuesday and resolved to come out with an action plan soon to salvage the infrastructure-financing conglomerate. Emerging from the meeting chaired by finance minister Arun Jaitley, Life Insurance Corporation of India chairman VK Sharma said the insurer won\u2019t allow IL&FS to collapse and hinted that it might increase its stake in the firm. \u201cWe will be trying our best, so that it (IL&FS) doesn\u2019t collapse\u2026doesn\u2019t create a contagion effect,\u201d Sharma said. All options, including increasing LIC\u2019s stake in IL&FS, were open, he said, adding that the action plan for the troubled infrastructure development and finance group would be clear by Friday. Speaking to the media later, Jaitley said the government was closely monitoring the situation; he endorsed the LIC chief\u2019s assurance but refused to elaborate on it. Apart from the funds infusion by LIC, a clutch of government-sector entities like the National Highways Authority of India might expedite payments of their dues to IL&FS group companies as part of the action plan, sources said. LIC is the largest shareholder in IL&FS with a 25.34% stake, followed by Orix Corporation of Japan, which owns 23.54%. Shares of IL&FS group companies surged up to 12% on Tuesday following the LIC offer. The scrip of IL&FS Engineering and Construction Company soared 12.02% and IL&FS Transportation Networks rose 5.74% on the BSE. IL&FS Investment Managers, however, ended marginally down (0.13%). Apart from Jaitley and Sharma, Tuesday\u2019s meeting was attended by RBI deputy governors Viral Acharya and NS Vishwanathan as well as State Bank of India chairman Rajnish Kumar. IL&FS Financial Services, a group company of IL&FS, defaulted on one of its commercial paper issuances due for repayment Monday. This was the third default by the company. What has landed the infrastructure development and finance group, which has long enjoyed the image of a robust institution, in trouble are a recent drying up of new infrastructure projects and the sharp increases in interest rates for short-term borrowings. Besides, its own highway and port projects have faced substantial cost overruns and payments have got delayed from state-run entities due to disputes. As reported by FE on Monday, IL&FS is behind payments on commercial paper worth approximately over Rs 300 crore and inter-corporate deposits worth roughly Rs 450 crore. IL&FS\u2019 outstanding borrowings are in the region of Rs 91, 000 crore, according to the company\u2019s annual report, and approximately Rs 20,000 crore is understood to be due for repayment within a year. The company has total liabilities in excess of Rs 1 lakh crore. The crisis in the group is threatening to have a spillover effect on government-run lenders, as many of them have significant exposure to debt papers of IL&FS. The RBI has summoned IL&FS shareholders for a meeting on September 28. The board of IL&FS is set to meet for its annual general meeting on September 29.