That's no 'mother' except biologically.
And her mother - to know her daughter is mentally ill, and know she's not been on medication for 3 years... has she even tried to help her daughter (and by extension, her grandchildren).
While I'm not sure I'd go as far as sterilizing her, I would certainly do whatever was needed to ensure she had NO access to those children unless she was currently medicated and receiving whatever therapies she needs to be a somewhat normal human being.
What is the point of rules that are not enforced?