Propagation time is given as 25 ms.
Bandwidth = 106 bps.
So, to fully utilize the channel, we must send 106 bits into the channel in a second, which will be 1000 frames per second as each frame is 1000 bits. Now, since the propagation time is 25 ms, to fully pack the link we need to send at least 1000 * 25 * 10-3 = 25 frames. Since, to represent 25 frames we need 25 distinct index numbers. Thus, minimum no. of bits required to do this will be 5 (2^5=32) as 4 will not be enough (2^4=16, not enough to represent 25 distinct no.)