What is FOIR? (Fixed Obligation to Income Ratio)

FOIR (Fixed Obligation to Income Ratio) is the share of income that goes to fixed monthly payments, new EMI included.

Written 07 September 2026. For bankers in India.

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In one line

FOIR tells you how much of a borrower's monthly income is already promised to fixed payments. If the share is too high, the borrower cannot carry a new EMI.

Why it matters to you

• Who uses it. Retail credit desks: housing loans, loan against property, personal loans, car loans.
• When. At the eligibility stage, before the loan amount is fixed.
• What it decides. FOIR sets the largest EMI the borrower can carry, and so the largest loan.
• What goes wrong. Miss one EMI or credit card due, and you sanction more than the borrower can repay.
• Who checks it. The officer who approves the loan, internal audit and inspectors all look for it in the file.

How it works

FOIR compares two monthly numbers: fixed payments and income.

1. Find the borrower's monthly income. Your bank's policy says whether this is gross income or net take-home income.
2. Add up the fixed monthly payments. Include the EMI of the loan he is asking for.
3. Divide the payments by the income. Multiply by 100 to get a percentage.
4. Compare with the cap in your bank's credit policy for that income band.

An income band is a range of income, such as Rs 5 lakh to Rs 10 lakh a year. Caps usually differ by band.

In words: FOIR equals total fixed monthly payments divided by monthly income, times 100.

In symbols: FOIR = (Existing EMIs + New EMI + Other fixed dues) / Monthly income x 100.

What each word means:

• Existing EMIs. EMIs on every loan still running, at any bank or NBFC. Read the credit bureau report too.
• New EMI. The EMI of the loan being applied for, at the rate and tenure (repayment period) proposed.
• Other fixed dues. Credit card dues, and at some banks rent and insurance premiums. Your bank's policy lists them.
• Guaranteed loans. Some banks also count EMIs on loans the borrower has guaranteed for someone else.
• Monthly income. Gross income at some banks; net take-home income at others. Your bank's policy decides.

Which income banks use

Bank pages differ. Bank of Baroda, ICICI Bank and Bajaj Housing Finance describe the formula on gross monthly income. State Bank of India, Tata Capital and some NBFC pages describe it on net income after tax and Provident Fund. State Bank of India uses NMI (Net Monthly Income), which is take-home pay after tax and salary deductions. It calls the ratio EMI/NMI.

For self-employed borrowers, income usually starts from the net profit in the Income Tax Return. Some lenders take the average of the last two or three years. Some add back depreciation, a book expense for wear of assets that costs no cash. Your bank's policy decides.

Which payments count

• Existing EMIs. Counted by every lender.
• The proposed EMI. Counted by every lender.
• Credit card dues. Counted by most lenders, as the minimum due or as a share of the outstanding.
• Rent. Counted by some lenders. At some it depends on the income level.
• Insurance premiums. Counted by some lenders.
• Statutory deductions. Tax, Provident Fund and professional tax are not obligations. They reduce income if the bank uses net income.
• Household spending. Food, school fees and fuel are not counted. The cap leaves room for them.

How FOIR becomes a maximum loan

1. Multiply monthly income by the FOIR cap. This is the largest total of fixed payments allowed.
2. Subtract the existing EMIs and other fixed dues. What remains is the room for the new EMI.
3. Divide the room by the EMI per lakh at the proposed rate and tenure. That gives the loan in lakh.

EMI per lakh means the EMI on a loan of Rs 1,00,000. At 8.5 per cent for 20 years it is about Rs 868. At 10 per cent for 15 years it is about Rs 1,075.

Worked examples

All EMIs below use the standard formula: E = P x r x (1+r)^n / ((1+r)^n - 1). Here P is the loan and n is the number of months. And r is the yearly rate divided by 12, then by 100.

Example 1: a salaried borrower in Pune with a car loan

• Gross monthly income: Rs 80,000.
• Existing car loan EMI: Rs 12,000.
• He wants a home loan at 8.5 per cent for 20 years.
• The bank's policy caps FOIR at 55 per cent of gross income for his income band.

Step 1. Largest total of fixed payments: Rs 80,000 x 55 per cent = Rs 44,000.

Step 2. Room for the new EMI: Rs 44,000 - Rs 12,000 = Rs 32,000.

Step 3. EMI per lakh at 8.5 per cent for 20 years: Rs 867.82. Largest loan: Rs 32,000 / 867.82 x Rs 1,00,000 = about Rs 36.87 lakh.

Check: a loan of Rs 36 lakh has an EMI of Rs 31,242. FOIR = (Rs 12,000 + Rs 31,242) / Rs 80,000 = 54.1 per cent. Under the cap.

If he asks for Rs 40 lakh, the EMI is Rs 34,713 and FOIR is 58.4 per cent. Over the cap. The bank can lower the amount or lengthen the tenure. Or it can add the income of a co-applicant, a second borrower on the same loan.

If the bank's cap were 50 per cent instead, the room would be Rs 28,000. The largest loan would be about Rs 32.26 lakh.

Example 2: a self-employed trader in Surat asking for a loan against property

• Net profit in the Income Tax Return: Rs 10,80,000 for financial year 2024-25 and Rs 9,00,000 for financial year 2023-24.
• Average net profit: Rs 9,90,000 a year.
• The bank's policy allows adding back depreciation, average Rs 90,000 a year.
• Assessed income: Rs 10,80,000 a year, or Rs 90,000 a month.
• Existing business loan EMI: Rs 18,000. Credit card minimum due: Rs 3,000. Total existing dues: Rs 21,000.
• He wants a loan against property at 10 per cent for 15 years.
• The bank's policy caps FOIR at 60 per cent for net annual income above Rs 10 lakh.

Step 1. Largest total of fixed payments: Rs 90,000 x 60 per cent = Rs 54,000.

Step 2. Room for the new EMI: Rs 54,000 - Rs 21,000 = Rs 33,000.

Step 3. EMI per lakh at 10 per cent for 15 years: Rs 1,074.61. Largest loan: Rs 33,000 / 1,074.61 x Rs 1,00,000 = about Rs 30.71 lakh.

Check: a loan of Rs 30 lakh has an EMI of Rs 32,238. FOIR = (Rs 21,000 + Rs 32,238) / Rs 90,000 = 59.2 per cent. Under the cap.

The loan-to-value cap applies as well. That is the largest loan allowed against the property's value. The lower of the two answers is the sanction limit.

Example 3: the same salaried borrower, now with a credit card balance

Take the borrower from Example 1. He also carries a credit card outstanding of Rs 1,00,000.

Suppose the bank's policy counts 5 per cent of the outstanding as a monthly obligation. That adds Rs 5,000 to his fixed dues. We could not confirm a common share from a public source; the 5 per cent here is only an illustration.

One credit card balance cut his eligible loan by about Rs 5.76 lakh. The share of the outstanding that counts is a bank practice. Your bank's policy decides.

What the rule says

NO RBI NUMBER for housing loans, personal loans and loan against property. The Reserve Bank of India does not fix FOIR for these loans. Each bank sets it in its own credit policy.

We checked these documents on 7 September 2026:

• The Master Circular on Housing Finance of 1 April 2025 fixes loan-to-value limits in section 3. No income ratio.
• The Housing Finance Companies Directions, 2025 fix loan-to-value limits in paragraph 58. No income ratio.
• Searches on rbi.org.in for FOIR, fixed obligation to income ratio and debt to income ratio found nothing.

RBI RULE for microfinance loans. For low-income households, RBI does fix a repayment-to-income cap.

• The document is the Master Direction on the Regulatory Framework for Microfinance Loans, 2022, updated 17 July 2025.
• Paragraph 3.1: a microfinance loan has no collateral (security). The household earns up to Rs 3,00,000 a year.
• Paragraph 5.1: the lender's board must cap a household's total monthly loan repayments as a share of household income.
• The cap in that board policy may not go above 50 per cent of monthly household income.
• Paragraph 5.2: the count must include every loan the household has, with or without collateral.
• Paragraph 5.3: a household already above 50 per cent gets no new loan until it comes back under the cap.
• Paragraph 2: the rule binds commercial banks, SFBs, RRBs, co-operative banks and NBFCs, including housing finance companies. Not payments banks.

So a household earning Rs 25,000 a month may carry at most Rs 12,500 a month in repayments. That counts all lenders.

BANK PRACTICE for other loans. The range seen in the market on 7 September 2026:

• Most bank and NBFC pages give a range of 40 to 55 per cent. Some go to 60.
• State Bank of India's loan against property page shows an EMI/NMI table by net annual income.
• Net annual income up to Rs 5 lakh: 50 per cent. Up to Rs 10 lakh: 55 per cent.
• Net annual income above Rs 10 lakh: 60 per cent.
• State Bank of India's home loan page says EMI/NMI runs from 20 to 70 per cent across income slabs.
• Some pages say 65 to 70 per cent is possible for very high incomes.

Your bank's policy decides. Nothing above is an RBI number.

BANKPULSE VIEW. Lenders allow a higher cap at higher income because such households spend a smaller share on food and rent. Even so, treat the cap as the outer limit, not a target. A borrower at the cap has no room for a rate rise or a lost month of income.

Common mistakes

• Counting only the loans on the application form. Borrowers forget loans. Pull the credit report and count every live account.
• Leaving out the proposed EMI. FOIR without the new EMI is meaningless. Always add it.
• Mixing gross and net. A 55 per cent cap on net income is far tighter than on gross. Follow policy.
• Ignoring credit cards. A large card balance is a fixed due. Count it the way your policy says.
• Using the wrong tenure. A longer tenure gives a smaller EMI and a lower FOIR. Use the tenure actually proposed.
• Stopping at FOIR. FOIR is one check. Loan-to-value, credit score and income proof are separate checks.

How to use it at your desk

1. Open your bank's credit policy. Note the income it uses, the dues it counts and the cap by income band.
2. Take the income from documents, not from the form: salary slips and bank statements, or Income Tax Returns.
3. Pull the credit bureau report, such as CIBIL. List every live loan's EMI and every card's outstanding.
4. Compute the proposed EMI at the rate and tenure you will actually offer.
5. Add up all fixed dues. Divide by income. Compare with the cap.
6. If it fails, try a lower amount, a longer tenure within policy, or a co-applicant.
7. Write the calculation in the appraisal note, the written note that supports the sanction. Show each number and its source.

Related terms

• What is INIR? (Instalment to Net Income Ratio) — INIR counts only the new instalment; FOIR counts every fixed payment.
• FOIR vs INIR — One borrower, computed both ways, passing one ratio and failing the other.
• What is LTV? (Loan to Value Ratio) — LTV caps the loan against the property; FOIR against income. Lower wins.
• What is own contribution? (Margin money) — The buyer's own share of the price; FOIR tests the EMI on the rest.
• Housing loan rules — the BankPulse rule page for housing loans.
• Personal loan rules — the BankPulse rule page for personal loans.
• Housing Finance Companies Directions 2025 — the RBI direction for housing finance companies, on BankPulse.

Quick check

A borrower earns Rs 60,000 a month, pays EMIs of Rs 9,000, and wants a Rs 21,000 EMI. FOIR?

Answer: (Rs 9,000 + Rs 21,000) / Rs 60,000 x 100 = 50 per cent.

Does RBI fix a FOIR cap for housing loans?

Answer: No. RBI fixes loan-to-value limits for housing loans, not an income ratio. Each bank's credit policy sets FOIR.

Where does RBI fix a repayment-to-income cap, and what is it?

Answer: Paragraph 5.1 of the Microfinance Loans Directions, 2022: at most 50 per cent of monthly household income.

Sources

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