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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Case Studies in Comprehensive Financial Advice

Caselet: Rakesh, aged 35, has a monthly take-home income of ₹1,20,000. His monthly outflows are: household expenses ₹40,000, home loan EMI ₹30,000, car loan EMI ₹10,000 and insurance premiums plus SIPs ₹15,000. Using the ratio of total EMIs to take-home income, what is his EMI-to-income ratio, and how does it compare with the commonly used benchmark of 40% at most?

Rakesh's EMIs total ₹40,000 (home loan plus car loan) against take-home income of ₹1,20,000, giving 33.3%. This is below the 40% benchmark. Household expenses, insurance premiums and SIPs are not loan repayments and must be excluded from the ratio.

  1. A25%, which is below the benchmarkCorrect
  2. B33.3%, which is below the benchmark
  3. C41.7%, which is above the benchmark
  4. D54.2%, which is above the benchmark

Explanation

Total EMIs = 30,000 + 10,000 = ₹40,000. Ratio = 40,000/1,20,000 = 33.3%. Check: 1/3 of income. Option 25% uses only the home loan EMI, 41.7% includes insurance and SIPs wrongly (55,000/1,20,000 would be 45.8%, so this is also wrong), and 54.2% adds household expenses.

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