Loans
FOIR: how Indian banks decide what you can borrow
Your credit score gets you through the door. FOIR decides how much you walk out with. It is the single most important number in an Indian loan application, and almost nobody calculates it before applying.
By Aman Multani, Founding Partner & Editor · Published 2 September 2026 · Last verified 2 September 2026
What FOIR is
FOIR stands for Fixed Obligation to Income Ratio. It measures how much of your monthly income is already committed before a new EMI is added.
FOIR = (Total fixed monthly obligations ÷ Monthly income) × 100
If a lender's ceiling is 50% and half your income already goes to existing EMIs, there is no room for a new loan — regardless of how good your credit score is. This is why people with excellent scores still get rejected, and it is the part nobody explains to them.
What counts as an obligation
Broadly, the recurring commitments a lender expects you to keep paying.
- Existing loan EMIs — home, car, personal, education, consumer durable
- Credit card dues, usually assessed as the minimum due or a percentage of the outstanding balance
- Monthly rent, which many lenders include for salaried applicants
- Other fixed recurring liabilities, depending on the lender
Generally excluded are statutory deductions such as provident fund and professional tax, and voluntary savings such as SIPs, recurring deposits and fixed deposits. These are treated as commitments you could stop, not obligations you must meet.
A worked example
Take someone earning ₹1,00,000 a month with these existing commitments:
| Obligation | Monthly |
|---|---|
| Car loan EMI | ₹12,000 |
| Personal loan EMI | ₹8,000 |
| Credit card minimum due | ₹4,000 |
| Rent | ₹16,000 |
| Total | ₹40,000 |
FOIR = (40,000 ÷ 1,00,000) × 100 = 40%
If the lender's ceiling is 50%, there is ₹10,000 a month of headroom. That headroom — not your salary, and not your credit score — is what determines the size of loan you will be offered.
Notice what happens if that person clears the credit card balance. Obligations drop to ₹36,000, FOIR falls to 36%, and headroom rises to ₹14,000 a month. Same income, same score, meaningfully larger loan.
What ceiling will a lender apply?
There is no single answer, and any article giving you one number is oversimplifying. What the sources broadly agree on:
| FOIR | How lenders generally read it |
|---|---|
| Below 40% | Comfortable. Low debt burden, approval more likely |
| 40% to 50% | Balanced, and typically acceptable to most lenders |
| 50% to 55% | Upper limit for many banks, though some go here for higher earners |
| Above 55% | Approval odds drop sharply. Some NBFCs go to 60%, but prefer not to |
The ceiling moves with several things: your income band, since higher earners are often allowed a higher ratio because more money remains after the EMIs; your credit score; whether the loan is secured or unsecured; and the individual lender's policy, which is theirs alone.
Why two banks give you two different numbers
People assume a rejection means something is wrong with them. Usually it means the two banks calculate differently. The variables:
- Gross versus net income — as above, this alone can shift the result substantially
- Whether rent is counted — some include it for salaried applicants, some do not
- How credit card debt is assessed — minimum due, or a percentage of the outstanding balance
- Secured versus unsecured — unsecured personal and business loans generally face stricter FOIR limits than loans backed by property, because the lender has no asset to fall back on
- Income stability — salaried applicants with a long record at one employer are read differently from those with variable or recent income
Self-employed applicants
If you are self-employed, income is usually assessed from filed returns and bank statements rather than a salary slip, and lenders typically want to see consistency across years rather than one strong year. Variable income is generally averaged, and a downward trend gets read as risk. Business obligations may be counted alongside personal ones depending on how the lender assesses the entity.
The practical implication: your paper income matters more than your actual income. Aggressive deductions that reduce your declared profit also reduce your borrowing capacity.
The ratio nobody mentions: LTV
For a secured loan there is a second constraint. Loan-to-Value limits how much the lender will advance against the asset — the property, in a home loan.
Your final eligibility is the lower of the two figures. You can clear FOIR comfortably and still be capped by LTV if the property valuation comes in below expectations. Most consumer explanations of loan eligibility stop at FOIR and never mention this, which is why valuations surprise people late in the process. The home loan eligibility calculator works out both limits from your income, existing EMIs and the property value.
Improving your FOIR before you apply
Close the loan with the highest EMI for its balance first
Not the largest debt — the one with the highest monthly outgo relative to its remaining balance. FOIR counts monthly commitment, not total debt.
Clear credit card balances
Card dues count as an obligation. Clearing them removes that line from the calculation entirely.
Consider a co-applicant
Adding an earning co-applicant increases the income side of the ratio. Their obligations are added too, so the arithmetic only helps if they have headroom.
What does not work: applying to more lenders hoping one says yes. Every application leaves a hard enquiry on your credit report, and a cluster of enquiries makes the next lender more cautious rather than less.
See this FOIR math turned into real loan amounts in our EMI affordability guide, or worked through specifically for a ₹50,000 salary across personal loans, home loans and car loans. For an unsecured personal loan specifically, the FOIR calculator applies this same method directly — personal loan is its default loan type, with no property-value check to worry about since none applies.
Common questions
Does a high credit score offset a high FOIR?
Sometimes it widens the ceiling slightly, but the two are assessed separately. A score tells the lender whether you repay. FOIR tells them whether you can afford to.
Is rent counted as an obligation?
Often, for salaried applicants, though practice varies by lender. Ask directly rather than assuming.
Do my SIPs count against me?
Generally not. Voluntary savings such as SIPs, recurring deposits and fixed deposits are usually excluded, as are statutory deductions like provident fund and professional tax.
What is a good FOIR?
Below 40% is comfortable at most lenders. Between 40% and 50% is normal and generally acceptable. Above 55% and approval becomes difficult.
Can I get a loan with a FOIR above 60%?
Occasionally — high-net-worth applicants and some secured loan products are treated more leniently. It is the exception, not something to plan around.
Educational information only, not financial advice. Found an error? Tell us and we will correct it with a dated note.