What it means
FOIR is a lender’s own affordability test, not a ratio set by RBI. The formula:
FOIR = (existing EMIs + other fixed obligations + proposed EMI) ÷ net monthly income × 100
Each lender sets its own ceiling in its credit policy, often lower for low incomes and higher for high incomes. A borrower over the ceiling is offered a smaller loan or a longer tenure, which brings the EMI down.
Example
Lakshmi, who runs a tailoring unit in Mysuru, applies for ₹1,20,000 over 12 months.
| Item | Monthly |
|---|---|
| Net income (from bank statements) | ₹60,000 |
| Existing two-wheeler EMI | ₹3,800 |
| Existing gold loan interest | ₹5,200 |
| Proposed EMI | ₹10,634 |
| FOIR | (3,800 + 5,200 + 10,634) ÷ 60,000 = 32.7% |
If the lender’s ceiling for her income band is 50%, she passes comfortably.
Common mistakes
- Using gross income for salaried borrowers when take-home pay is what repays the loan.
- Leaving out obligations that show in the credit bureau report but not on the form.
- Ignoring seasonal income for small businesses and farmers.
In MyRecords
The loan application in MyRecords works out FOIR from the monthly income, existing EMIs and this loan’s EMI on its Ratios & bureau tab, next to LTV and the bureau details. It shows green up to 50%, amber just above and red beyond; your own credit policy still decides.