FOIR

Fixed Obligation to Income Ratio expresses total fixed monthly obligations, including existing EMIs and the EMI of a new loan being considered, as a percentage of net monthly income. Lenders use an assumed FOIR percentage to estimate how much additional EMI a borrower can reasonably take on.

A Conservative band (commonly 40%) leaves more income unallocated to EMIs, a Standard band (commonly 50%) is a frequently used mid-range assumption, and an Aggressive band (commonly 60%) assumes a higher share of income can go toward EMIs. Different lenders and different borrower risk profiles can reasonably use different bands.

Net monthly income multiplied by the chosen FOIR percentage gives a total obligation budget. Subtracting existing EMI obligations from that budget gives the maximum EMI available for a new loan, which can then be converted into a maximum loan amount using a reverse EMI calculation at a given rate and tenure.

At a ₹1,00,000 net monthly income and a 50% FOIR band, the obligation budget is ₹50,000. With ₹10,000 of existing EMIs, ₹40,000 remains available as the maximum EMI for a new loan.