FOIR (Fixed Obligations to Income Ratio) is a popular parameter which banks use to determine loan eligibility. As per bank’s eligibility criteria, the borrowers should restrict all their fixed obligations including the currently applying loan EMI to 50% of his monthly income. Or in other words, considering that 50% of your income is required for your living, banks would see that all your monthly loan obligations / liabilities should be only 50% of your monthly income.
If the calculated ratio is more than the bank’s benchmark, ie ( 50% here), then the bank would restrict the applying loan amount in a way that including the current EMI, your monthly liabilities would come within 50% of your monthly income.
To put it in a simple way, say suppose if your monthly income is Rs.50000/- and you have other loans with EMI 15000. In this scenario, bank would approve you a loan which EMI would be maximum 10000 (if they mentioned FOIR as 50%).
FOIR ratio vary from bank to bank and from case to case, but on an average it would be with 40% to 55%