Sure! Here's the properly formatted, plain text version of the answer to your question: "What is EMI in banking?" You can easily copy and paste this anywhere now: EMI in Banking EMI stands for Equated Monthly Installment. It is a fixed amount a borrower pays every month to a lender to repay a loan over a specific period. EMIs are commonly used in loans such as home loans, personal loans, vehicle loans, and education loans. Components of EMI: 1. Principal: The original loan amount borrowed. 2. Interest: The cost of borrowing, charged on the outstanding principal. Each EMI includes both principal and interest. Initially, the interest component is higher, and the principal component is lower. Over time, the interest portion decreases while the principal repayment increases. How EMI Works: EMIs are calculated based on the loan amount, interest rate, and loan tenure. The amount remains mostly fixed throughout the repayment period, helping borrowers plan their finances. Interest can be charged using different methods, like flat rate or reducing balance method. EMI Formula: EMI = \[P × R × (1 + R)^N] / \[(1 + R)^N – 1] Where: P = Loan amount (Principal) R = Monthly interest rate (Annual interest rate ÷ 12 ÷ 100) N = Loan tenure in months Importance of EMI: Helps in budgeting by spreading repayments over time. Makes large purchases (like homes or vehicles) affordable. Supports building a good credit score if paid on time. Summary: EMI is a fixed monthly repayment made by a borrower towards a loan. It consists of both principal and interest and helps in structured and predictable repayment of loans.