ATM Networks are high speed networks with guaranteed quality of service. The main cause of congestion in ATM networks is over utilization of the physical bandwidth. Unlike constant bit rate traffic, the bandwidth reserved by variable bit rate (VBR) traffic is not fully utilized at all instances. Hence, this unused bandwidth is allocated to available bit rate traffic (ABR). As trle bandwidth used by VBR traffic changes, available bandwidth for ABR traffic varies, i.e., available bandwidth for ABR traffic is inversely proportional to the bandwidth used by the VBR traffic. Based on this fact, a rate based congestion control algorithm, Explicit Allowed Rate Algorithm (EARA), is presented in this paper. EARA is compared with Proportional Rate Control Algorithm (PRCA) and Explicit Rate Indication Congestion Avoidance Algorithm (ERICA), under congestion and faimess configurations. The results show that, with minimal overhead on the switch, EARA significantly decreases the required buffer space and improves the network throughput.