Indian Railways (IR) is under increasing pressure on existing routes to handle larger passenger and goods traffic, which is growing at the rate of 10% per annum. Some of the busy sections are reaching their Capacity limit. Conventional method for enhancing the capacity of railways is by adding additional lines. Similarly by adding stations and shortening the inter-station distance, it is possible to increase the number of trains on the same line. However both these are expensive options. Intermediate Block Signalling (IBS) is a technique by which a block section between two adjoining stations is split into two by provision of additional signal which is remotely controlled from the station. The effect of such signalling arrangement is the same as providing additional manned stations and increases the number of trains that can be passed on a line. The objective of this paper is to examine the Signalling arrangement in IBS, its effect on line capacity and its design aspects to ensure safety of train operation. Theoretically predicted capacity increase is compared with actual increase achieved on a sample section of 126 Route kilometres.