Glossary term

EMI

Equated Monthly Instalment — the fixed monthly amount you pay to repay a loan, computed on a reducing-balance basis.

An Equated Monthly Instalment (EMI) is the fixed monthly amount paid to a lender until a loan is fully repaid. It's computed using the formula EMI = P × r × (1+r)^n / ((1+r)^n − 1), where P is principal, r is the monthly rate, and n is the number of months.

All Indian banks use the reducing-balance method — interest is charged only on the outstanding principal each month. In early years, most of your EMI is interest; in later years, most is principal.