This procedure is specifically targeted at macroeconomic imbalances, meaning extreme and persistent divergences from a sustainable trend that threaten the proper functioning of monetary union. It is not about achieving higher growth potential which is of course highly desirable and is the goal of the EU 2020 strategy.
Third, recognising the potential of “purchased inter-bank liabilities” (IBL) to create systemic problems, RBI had issued guidelines in March 2007 prescribing that IBL of a bank should not exceed 200% of its net worth (300% for banks with a Capital to Risk Assets Ratio (CRAR) more than 11.25%).