What Does Capital Rationing Mean?

The act of placing restrictions on the amount of new investments or

projects undertaken by a company. This is accomplished by imposing a
higher cost of capital for investment consideration or by setting a ceiling on
the specific sections of the budget.

Investopedia explains Capital Rationing

Companies may want to implement capital rationing in situations where
past returns of investment were lower than expected. For
example, suppose ABC Corp. has a cost of capital of 10% but that
the company has undertaken too many projects, many of which are
incomplete. This causes the company's actual return on investment to drop
well below the 10% level. As a result, management decides to place a cap
on the number of new projects by raising the cost of capital for these new
projects to 15%. Starting fewer new projects would give the company more
time and resources to complete existing projects.