How to Calculate FOIR: Formula, Examples, and What Counts as a Good Ratio

FOIR decides whether your borrower can actually afford the EMI. Get the FOIR calculation wrong and you do one of two expensive things: reject good customers who could have paid, or approve borrowers who default in month three. This is the ratio that tells you what is left in the account after every fixed obligation is met, including the loan you are about to sanction.

The FOIR calculation is simple arithmetic. The hard part is knowing which obligations to load into it and where the real numbers live. This guide walks the formula, a worked example with rupee figures, the ranges lenders actually use, how FOIR differs from DTI, and the mistakes that quietly inflate a borrower’s apparent capacity.

What is the FOIR full form, and what does it measure?

FOIR is the Fixed Obligation to Income Ratio. It measures the share of a borrower’s monthly income already committed to fixed obligations, expressed as a percentage. The lower the FOIR, the more breathing room the borrower has to take on a new EMI.

It is a affordability check, not a willingness-to-pay check. CIBIL tells you whether someone repays. FOIR tells you whether they can. A borrower can have a clean 780 score and still be dangerously over-committed if half their salary already goes to existing EMIs and rent. FOIR is how you catch that before you sanction.

What is the FOIR formula?

Here is the formula every lender uses, in a single box.

FOIR = (Total fixed monthly obligations / Net monthly income) × 100

Where:

• Fixed monthly obligations = existing EMIs + the proposed new EMI + other recurring fixed commitments (rent, alimony, statutory deductions, where policy includes them)
• Net monthly income = take-home income after tax and statutory deductions

The result is a percentage. A FOIR of 50% means half the borrower’s income is already spoken for once the new loan is added.

Two things decide the answer as much as the math does:

1. What goes in the numerator. Do you count the existing personal-loan EMI? The credit-card minimum due? The rent? The informal monthly transfer to a moneylender that never shows up on a CIBIL report? Each obligation you add or drop moves the ratio.
2. What counts as income in the denominator. Net (take-home) or gross? Salary only, or salary plus stable rental and interest income? Most prudent lenders use net income and only credit income they can verify in the bank statement.

Get either definition loose and the ratio stops protecting you.

How do you calculate FOIR? A worked example

Let us run a real one. Meet a salaried applicant applying for a personal loan.

Step 1: Add up all fixed obligations, including the proposed EMI.

14,000 + 4,000 + 9,000 + 18,000 = ₹45,000

Step 2: Divide by net monthly income and multiply by 100.

(45,000 / 90,000) × 100 = 50%

Step 3: Read it against policy. A FOIR of 50% on an unsecured personal loan is borderline-to-high. After all obligations, this borrower keeps ₹45,000 (their disposable income) to cover rent, food, utilities, school fees, and any shock. For many NBFCs the unsecured cap sits at 50% to 55%, so this case is right at the edge and would likely move to approve-with-conditions or a smaller ticket.

Now watch what happens if you forget the credit-card minimum and the existing personal loan, a common slip when you only look at the sanction letters in front of you:

(14,000 + 18,000) / 90,000 × 100 = 35.5%

The same borrower now looks comfortably approvable. That 14.5-point gap is the difference between a clean book and a delinquency. The obligations you miss are exactly the ones that sink the case.

What is a good FOIR for a loan?

A good FOIR depends on the loan type, the borrower profile, and your own risk appetite. As a rule of thumb, lower is safer, and secured loans tolerate higher FOIR than unsecured ones. Here are the ranges most Indian lenders work within.

Indicative caps by loan type:

• Unsecured personal loans / consumer durable: lenders typically cap FOIR around 50% to 55%, sometimes lower for thin-file borrowers.
• Home loans: because they are secured and long-tenure, caps often run 55% to 65%, and higher-income applicants are allowed to push toward the upper end (someone earning ₹3 lakh a month can live on 40% of income more easily than someone earning ₹40,000).
• Loan against property / secured business loans: similar to home loans, frequently 55% to 60%, with the collateral doing some of the work.
• Self-employed / variable income: apply a haircut to declared income first, then hold FOIR tighter, because the income line itself is less certain.

These are conventions, not regulation. Your policy sets the real number, and a sharp credit team adjusts the cap by income slab: the same 55% FOIR is far more dangerous on a ₹30,000 salary than on a ₹2,00,000 one, because absolute disposable income is what actually services life.

FOIR vs DTI: are they the same thing?

FOIR and DTI (debt-to-income ratio) are close cousins and the terms are often used interchangeably, but there is a meaningful difference in scope.

The practical takeaway: FOIR is the broader, more conservative measure because it captures non-debt fixed costs like rent that still eat into repayment capacity. If you import a DTI cap from a US playbook and apply it to FOIR-style inputs, you will misread the buffer. Pick one definition, write it into policy, and apply it consistently.

How does a bank statement feed the FOIR calculation?

The bank statement is where FOIR goes from a declared number to a verified one. Sanction letters and a salary slip tell you what the borrower says they earn and owe. The statement shows what is actually moving through the account, including the obligations they did not mention.

A proper bank statement analysis feeds FOIR on both sides of the formula:

• The denominator (income): recurring salary credits, business inflows, rental receipts, and interest income, separated from one-off transfers and self-transfers so you do not inflate income with money the borrower simply moved between their own accounts.
• The numerator (obligations): NACH and ECS debits for existing EMIs, standing instructions, recurring loan repayments, and credit-card payments. These appear month after month at similar amounts and dates, which is exactly the fingerprint of a fixed obligation.

This is also where you catch the EMIs that never reach a credit bureau: a fixed monthly debit to an NBFC or an individual that looks and behaves like a loan repayment. The statement is the only place those surface. Once you have a clean read of verified income and every recurring debit, the FOIR calculation is deterministic. For the full set of checks around this, see the credit underwriting checklist.

What are the most common FOIR calculation mistakes?

Most FOIR errors are not arithmetic. They are input errors that quietly understate the numerator or overstate the denominator, and they all point the same direction: making the borrower look more affordable than they are.

1. Missing informal or undisclosed EMIs. The borrower discloses two loans; the statement shows a third recurring debit they “forgot.” Bureau-invisible obligations (loans from an NBFC outside the bureau, friends-and-family repayments, BNPL) are the single biggest source of FOIR understatement.
2. Counting the wrong obligations. Treating a one-off large debit (a wedding payment, a tax outgo) as a recurring obligation overstates FOIR and rejects a good borrower. The reverse is worse: ignoring a genuine standing instruction because it did not appear in the one month you sampled.
3. Using gross income instead of net. Inflating the denominator with pre-tax income flatters the ratio. Use take-home.
4. Counting self-transfers as income. Money the borrower moves between their own accounts is not income. Net it out before it lands in the denominator.
5. Sampling one month. EMIs and income vary. A single month can miss a quarterly obligation or catch a one-time bonus. Average across the statement period.
6. Forgetting the proposed EMI. FOIR must include the new loan’s EMI. The point of the ratio is post-sanction affordability, not the status quo.

A note on which obligations belong in the numerator: there is no single right answer across lenders. Some include rent, some exclude it; some load the full credit-card outstanding, others just the minimum due. In Obsrv, which obligations load FOIR is policy-configurable, so the ratio reflects your credit policy rather than a generic default, and the same rules apply to every case for an auditable, consistent read.

Frequently asked questions

What is the FOIR formula in one line?

FOIR = (total fixed monthly obligations including the proposed EMI / net monthly income) × 100, expressed as a percentage. It is the share of income already committed once the new loan is added.

What is a good FOIR for a personal loan?

For unsecured personal loans, most lenders prefer FOIR at or below 50%, and many cap it around 50% to 55%. Below 35% is comfortable; above 60% usually means the borrower is over-committed and the case is declined or restructured to a smaller ticket.

Is FOIR calculated on gross or net income?

Indian lenders typically calculate FOIR on net (take-home) income, after tax and statutory deductions. Using gross income inflates the denominator and makes the borrower look more affordable than they are. Whichever base you choose, write it into policy and apply it consistently.

What is the difference between FOIR and DTI?

FOIR (fixed obligation to income ratio) counts all fixed obligations including rent and statutory deductions, and is usually computed on net income. DTI (debt-to-income ratio) counts only debt repayments and is often computed on gross income. FOIR is the broader, more conservative measure.

Which obligations should be included in FOIR?

At minimum, every existing EMI, recurring loan repayment, and the proposed new EMI. Beyond that it is a policy choice: rent, credit-card dues, alimony, and statutory deductions may or may not be loaded depending on your credit policy. The critical step is catching undisclosed and bureau-invisible obligations from the bank statement.

Can FOIR be too low?

A very low FOIR signals strong capacity, so it is rarely a problem on its own. But a near-zero FOIR on a thin-file borrower can mean limited credit history rather than discipline, so read it alongside income stability and account behaviour, not in isolation.

Calculate FOIR without the manual errors

FOIR is only as good as the numbers feeding it, and those numbers live in the bank statement. Obsrv reads income and every recurring obligation straight from the statement, nets out self-transfers, and computes FOIR and disposable income deterministically, so the same statement always produces the same ratio. The AI only transcribes; the money math is auditable code, every row reconciled against the running balance and column totals. Which obligations load FOIR is configurable to your policy, so the ratio reflects how you underwrite. It is self-serve at ₹5 a page, with no sales call. See it at obsrv.in .