Under this system, each scheduled bank was assigned a quarterly quota equal to half of the average volume of reserves, which it had to maintain under Section 42(1) of the RBI Act during each week of the preceding year. The quota slab system could be liberalised or tightened as necessary for effective quantitative check on credit expansion.
The quota-slab system, where availability of credit was the key control variable, was replaced in 1964 by a scheme of accommodation based on banks’ net liquidity ratio (NLR), which was considered to be a less discretionary form of central bank control over the expansion of commercial bank credit than the quota-slab system.