FOIR (Fixed Obligation to Income Ratio) is the share of a borrower’s monthly net income that is committed to fixed debt obligations — existing EMIs plus the proposed new EMI. Indian banks use FOIR as the primary lever to size unsecured and secured retail loans. Most banks cap FOIR between 50% and 65% depending on income bracket.
Formula
FOIR = (sum of all monthly EMIs) / monthly net income × 100
Where:
- All monthly EMIs = existing home/car/personal/credit-card EMIs + the proposed new EMI
- Monthly net income = take-home salary (gross minus PF, professional tax, income tax)
Worked example
Net monthly salary: ₹1,00,000. Existing car loan EMI: ₹15,000. Existing credit-card EMI: ₹5,000. Bank caps FOIR at 55%.
Maximum allowable total EMI = 55% × 1,00,000 = ₹55,000. EMI room for new loan = 55,000 − 15,000 − 5,000 = ₹35,000.
At 8.5% over 20 years, ₹35,000 EMI corresponds to a ~₹40 lakh principal.
Why FOIR matters more than income
A high salary doesn’t automatically mean a large loan. Two applicants on ₹1L net salary can be approved for very different loan amounts based on their existing obligations. Reducing FOIR — by closing a credit-card balance or paying off a personal loan — is often the fastest path to a higher home-loan eligibility.