NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Evaluating the Financial Position of Clients
Rohan earns a gross monthly income of Rs 1,00,000 and pays EMIs totalling Rs 35,000 per month on a home loan and a car loan. What is his debt service ratio, and how does it compare with a commonly used benchmark of 40% maximum?
The debt service ratio is Rs 35,000 divided by Rs 1,00,000, which is 35%. Since this is below the 40% maximum benchmark, Rohan's debt burden is within the acceptable limit.
- A35%, within the benchmarkCorrect
- B35%, above the benchmark
- C28%, within the benchmark
- D45%, above the benchmark
Explanation
Debt service ratio = EMIs / gross income = 35,000 / 1,00,000 = 35%. This is below the 40% ceiling, so it is within the benchmark. The 45% option would wrongly add other costs not given in the question, and 28% is an unsupported figure.
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