In a standalone DC microgrid, sources are interconnected in a parallel configuration. When sources of different power ratings are parallel connected, there arises a major issue of circulating currents which disturb current sharing by sources as per their capacity. Consequently, the voltage regulation becomes poorer. Additionally, connecting line resistances also play their part to contribute to abnormal current sharing. Droop controllers are normally preferred for the mitigation of circulating currents among parallel-connected sources. However, droop controllers cannot eliminate circulating currents for different rating sources. Hence, current sharing and voltage regulation cannot be ensured simultaneously. To address the issues, a distributed architecture-based Sliding Mode Control (SMC) technique is proposed in this paper. An analysis of the circulating currents for a two-source system is presented. Simulation results are presented to show the effectiveness and fail-safe operation of the proposed technique in a steady-state condition.