In the world of banking, the term “Quick Mortality Account” is used to describe a specific classification of loan accounts or credit facilities.
These accounts exhibit a unique characteristic they transition into Nonperforming Assets (NPAs) in an exceptionally short timeframe, typically less than a year.
In this article, we will provide details related to above subject and the reasons behind their rapid NPA status.
INTRODUCTION QUICK MORTALITY
It covers Defining Quick Mortality Accounts in the Banking Sector and Identifying the Triggers for Quick Mortality Classification.
These Accounts are a distinct category within the banking sector. They are loan accounts or credit facilities that, despite being sanctioned with the expectation of healthy repayment, unexpectedly turn into NPAs within a very brief period.
The objective of classifying an account as a Quick Mortality Account is to thoroughly investigate the factors responsible for its rapid descent into NPA status.
If an advances account transitions into NPA status within 12 months from the date of disbursement, it falls under the category of ‘Quick Mortality Cases.’
The primary aim of designating a credit facility as a ‘Quick Mortality Case’ is to ensure a thorough examination in the event of any lapse occurring at any stage of the loan process.
This classification prompts a careful review of staff accountability. Ideally, in standard circumstances, no account should deteriorate into NPA status within the initial 12 months.
In this above case, an in-depth investigation into staff accountability becomes essential.”
CASH CREDIT LIMITS IN QUICK MORTALITY
It covers the followings.
Scenario: Cash Credit Limit Sanctioned on April 1, 2021
NPA Trigger: Account turns NPA by March 31, 2022
Result: Designation as a Quick Mortality Account
Consider a scenario where a Cash Credit limit was sanctioned on April 1, 2021. To qualify as a Quick Mortality Account, this account must become an NPA on or before March 31, 2022.
This means that within just one year of approval, if the account fails to maintain its financial health, it is categorized as a Quick Mortality Account.
TERM LOANS
It covers the followings.
Scenario: Term Loan Sanctioned on April 1, 2021, with a start date of October 1, 2021
NPA Trigger: Account turns NPA by September 30, 2022
Result: Designation as a Quick Mortality Account
 Similarly, for Term Loans, if an account is sanctioned on April 1, 2021, with repayment scheduled to commence from October 1, 2021, it qualifies as a Quick Mortality Account if it turns NPA on or before September 30, 2022.
BANKING POLICIESÂ
Banks adopt a prudent approach to handle Quick Mortality Accounts. These policies are carefully crafted and approved by the board to address the unique challenges posed by such accounts.
PURPOSE OF CLASSIFICATION
The primary purpose of classifying an account as a Quick Mortality Account is to investigate the factors that led to its NPA status within an exceptionally short span of time.
This classification serves as a red flag, prompting a closer examination of the circumstances surrounding the account’s downfall.
INVESTIGATIVE PROCEDURESÂ
Investigations are initiated, particularly when the account breaches a predefined threshold limit.
These investigations are crucial in determining staff accountability and identifying any lapses in the due diligence process.
STAFF ACCOUNTABILITY
One notable aspect of Cases is the elevated likelihood of staff related lapses.
It is expected that if proper due diligence had been exercised at the time of account sanctioning, the account should not have transitioned into an NPA within one year. Staff accountability is a critical factor in these cases.
CONCLUSION
Accounts are a specialized category in banking that demands careful attention.
Identifying the reasons behind an account’s swift transition into NPA status is essential for improving lending practices and ensuring accountability within the banking sector. You can also read RBI Quick Mortality
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