What is quick mortality in Indian Banking?
Quick mortality is a term used in banking for loan accounts which turn bad (classified as Non Performing Assets or NPA) within a period of one year. The term signifies that account died quickly.
A loan account is termed as Quick mortality account if it becomes NPA within one year of original sanction or first disbursement. And in case of Term Loan within one year from the date of commencement of installment, whichever is later.
For example, a Cash Credit limit was sanctioned on 1st April 2021 and the account turns NPA on or before 31st March 2022, the account will termed as Quick Mortality Account.
In case of Term Loan, say the account was sanctioned on 1st April 2021 and were to start from 1st October 2021 as per sanction. If the account turns NPA on or before 31st September 2022, it will be termed as Quick Mortality Account.
The Banks do have a Board approved policy for dealing with the quick mortality cases.
The purpose of classifying a loan account or credit facility as quick mortality is identify the reasons for turning the account NPA within such a short span of time (i.e., less than on year). Generally investigations are got done (above a threshold limit) in all the quick mortality cases to examine staff accountability.
The chances of staff side lapse are high in quick mortality cases, at is expected that the account should not turn NPA within one year if proper due diligence of the borrower had been done at the time of sanction.