1.is it a genuine reason?

May be. please tell did u pay any fee or VISA charges to them then it might be a scam as u said " to my surprise no formal interview happened, except a salary negotiation"

2.shall i believe them ?

You Have to This might be a scam

3.what might be the reason for rejection?

Normally there is no good reason for rejection may due to quata for Indians is full

4.whether the ministry will consider the same again?

YES they will consider you again and most lokely u can get VISA next time