Under the scheme, scheduled commercial banks were required to obtain the Reserve Bank’s authorisation before sanctioning any fresh credit of Rs.1 crore or above to any one borrower or any fresh limit which would take the total limits engaged by the borrowers from the entire banking system to Rs.1 crore.
This scheme helped in preventing the problem of pre-emption of scarce bank reserves by a few large borrowers and enforcing a measure of financial discipline on them. 15. As is evident from the above, in the initial phase of scarce credit, Reserve Bank used credit management techniques to ensure efficacious use of credit.