What is FOIR (fixed obligation to income ratio)?
What share of a borrower's income is already committed to debt.
The share of a borrower's monthly income already committed to fixed obligations, including the instalment being applied for. It is the primary underwriting ratio in unsecured lending, where there is no security to fall back on and the file is the whole of the credit view.
How is FOIR calculated?
Existing obligations plus the proposed instalment, divided by considered income. The judgement is in the denominator: which parties' income counts, and how much weight undocumented income carries. Net monthly income is usually taken in full because documents stand behind it; other income is commonly counted at a haircut because it has no document trail.
FOIR: a worked example
Net income ₹80,000, other declared income ₹20,000 counted at a 50% haircut, giving ₹90,000. Existing EMIs of ₹25,000 and a proposed EMI of ₹20,000 give ₹45,000 against ₹90,000 — a FOIR of 50%. Counting the other income in full would have produced 45%, which is how a marginal file becomes an approved one.
Why does FOIR matter?
Because it is the ratio the credit committee argues about, and an argument is only possible if the workings are visible. A FOIR that arrives as a single number has to be trusted, and trust is not a control.
What a lending system has to do about FOIR
The haircut is a field on the scheme, because how much undocumented income to count is a credit-policy choice per product rather than a constant. The workings are stored with the answer, and a breach of the scheme's ceiling records a deviation carrying the approval level it requires — so the file rises to the person entitled to allow it rather than silently passing.
Related terms
- EMI (equated monthly instalment) — A fixed monthly payment covering both interest and principal.
- KFS (Key Facts Statement) — A standard-format summary of what a loan actually costs.
- DPD (days past due) — How many days an instalment has been overdue.
From the people who wrote this
Run your lending on Lenviq
The section above describes what a lending system has to do about this term. Lenviq does it — on every account, computed at day-end, with the direction it comes from recorded against it.
Lenviq is loan origination, servicing and accounting for NBFCs, built by FastLegal Technologies.