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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Debt Management and Loans

Which of the following best describes the Fixed Obligation to Income Ratio (FOIR) used by lenders when assessing a borrower's loan eligibility?

FOIR is the share of a borrower's monthly income absorbed by all fixed obligations, including existing EMIs and the proposed EMI. Lenders use it to judge repayment capacity and cap the permissible ratio. It is different from loan-to-value, which compares the loan with the property's value.

  1. AShare of the borrower's monthly income that goes towards all fixed obligations including the proposed EMICorrect
  2. BRatio of the borrower's total assets to total liabilities
  3. CRatio of the loan amount to the market value of the property
  4. DRatio of the borrower's monthly savings to monthly expenses

Explanation

FOIR measures fixed monthly obligations (existing EMIs plus the proposed EMI) as a percentage of monthly income. Lenders cap it to ensure repayment capacity. The loan-to-value ratio is a different measure comparing loan to property value.

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