AU Small Finance Bank Loan Settlement Guide 2026
AU Small Finance Bank is one of India's fastest-growing banks, serving millions of customers. While they are generally customer-centric, financial hardships can happen to anyone. If you find yourself unable to repay your Personal Loan, Credit Card, or MSME loan dues, **you are not alone**.
Defaulting on an AU Bank loan can lead to intense collection efforts and legal notices. However, the bank has a structured **One Time Settlement (OTS)** policy for borrowers in genuine distress. This guide will walk you through the process of settling your debt legally, handling arbitration notices, and stopping harassment.
Is Your AU Bank Arbitration Notice Fake?
Many borrowers receive threatening messages on WhatsApp claiming to be "Court Summons" or "Arbitration Notices". 90% of these are fake tactics used by third-party agencies. Use this checklist to verify:
| Feature | FAKE NOTICE (Scam) | REAL NOTICE (Legal) |
|---|---|---|
| Delivered Via | WhatsApp, Personal Gmail | Registered Post or Official Email (@aubank.in) |
| Legal Reference | Vague threats (" IPC 420 case") | Specific: Arbitration & Conciliation Act, 1996 |
| Sender ID | "Advocate Rahul" (No Reg No.) | Bank's Legal Dept or Registered Law Firm |
| Action Demanded | "Pay immediately to avoid arrest" | "Attend hearing on [Date] or file reply" |
Note: If you receive a real notice (Registered Post), do not ignore it. It can lead to an *Ex-Parte* award (a judgment passed against you in your absence), which is legally binding. Contact CredSettle immediately to represent you.
Understanding AU Bank's OTS Policy
The One Time Settlement (OTS) scheme is a special provision where the bank agrees to close your loan account for a reduced amount. This is typically available when:
- Unsecured Loans: Personal Loans and Credit Card debts are the most common candidates.
- NPA Status: Your account is usually classified as a Non-Performing Asset (unpaid for >90 days).
- Genuine Hardship: You can prove inability to pay due to job loss, medical crisis, or business failure.
- Secured Loans: For Vehicle or Gold loans, settlement is harder but possible if the asset value has depreciated significantly below the loan amount.
MSME Loan Settlement
AU Bank has a specific Board-approved policy for MSME settlements. They may require an upfront payment of **25%** of the settlement amount to process the proposal. The remaining balance typically needs to be paid within 3 months.
Step-by-Step Settlement Process
Case Evaluation
Review your total outstanding, including penalties. Gather proofs of your financial hardship (termination letter, medical reports).
Legal Shielding
If recovery agents are harassing you, engage a legal firm like CredSettle. We inform the bank that we represent you, which stops direct harassment.
Proposal Submission
Submit a formal written proposal. Do not rely on verbal negotiations with field agents. The proposal must go to the Credit Manager.
Negotiation & Approval
The bank will counter-offer. Skilled negotiation is key here to maximize waivers. Once agreed, get the Settlement Letter.
Drafting Your Settlement Proposal
Use this format when emailing your settlement request to **customercare@aubank.in** or the **Regional Nodal Officer**.
Subject: Hardship & Settlement Request - Loan A/C [YOUR_LOAN_NUMBER]
Dear Branch Manager / Nodal Officer,
I hold a personal loan (A/C No: [NUMBER]) with your bank. I have been regular with my payments until [DATE].
Since then, I have faced severe financial distress due to [REASON: Job Loss/Medical Issue]. Documents attached for proof.
My current outstanding is shown as Rs. [AMOUNT] which includes heavy penalties. I am unable to pay this. I am offering a ONE TIME SETTLEMENT of Rs. [OFFER_AMOUNT] to close this account immediately.
Kindly consider this request on humanitarian grounds. I am willing to pay the amount in [1 or 2] installments.
Sincerely,
[YOUR_NAME]
[PHONE_NUMBER]
Written Off vs Settled: The Real Cost
Is it better to settle or just stop paying? Here is the truth about how AU Bank reports these statuses to CIBIL:
Written Off
(Dangerous)
- Bank considers money "unrecoverable" but keeps legal rights.
- CIBIL Score crashes by 150-200 points.
- Status remains for 7 years.
- Legal cases (Arbitration/Civil Suit) usually continue.
Settled
(Safe Exit)
- Loan is officially CLOSED.
- CIBIL Score drops but stabilizes.
- All legal cases are withdrawn.
- No harassment. You can rebuild credit in 18-24 months.
Grievance Redressal & Escalation
If the branch staff is unhelpful or rude, you must escalate. AU Bank has a transparent escalation matrix.
| Level | Officer | Contact |
|---|---|---|
| Level 1 | Regional Nodal Officers | Delhi: rno.delhi@aubank.in Mumbai: rno.mumbai@aubank.in Jaipur: rno.jaipur@aubank.in |
| Level 2 | Principal Nodal Officer | Mr. Deepak Babber pno@aubank.in 0141-6660654 |
| Level 3 | RBI Ombudsman | cms.rbi.org.in |
Authorized Collection Agencies
AU Bank outsources recovery to agencies. If you are contacted by agencies like **"Hallmark Financial Services"**, **"Shree Hari Collection Agency"**, or **"Siddhi Vinayak Enterprises"**, they are likely authorized. However, authorization does **not** give them the right to harass you. Report any abusive behavior immediately to the Nodal Officer.
Why Choose CredSettle?
Bank-Level Negotiation
We deal directly with the credit and legal teams, not just the call center.
Arbitration Defense
Our lawyers handle the online arbitration hearings for you.
No Harassment
We legally mandate all communication to be routed through us.
Pay Only If You save
Our success fee matches your savings. No risk to you.
Success Stories
"I had a huge business loan with AU Bank and lost my shop. CredSettle helped me get an MSME settlement with 45% waiver. Life saver."
"Received an arbitration notice. I was clueless. The CredSettle team attended the hearing and closed the matter within 20 days."
Frequently Asked Questions
Can I settle my AU Small Finance Bank Personal Loan?
Yes, AU Bank allows One Time Settlement (OTS) for personal loans if the borrower can demonstrate genuine financial hardship, such as job loss or medical emergencies. The loan usually needs to be classified as NPA (90+ days overdue) to be eligible.
Will settling my AU Bank loan affect my CIBIL score?
Yes, settling a loan results in a 'Settled' status on your CIBIL report, which drops your score by 50-100 points. However, this is better than a 'Written Off' status, which damages your score much more severely and remains for years.
How do I identify a fake AU Bank arbitration notice on WhatsApp?
A fake notice often comes from a personal number (not an official business account), contains spelling errors, threatens immediate arrest (police cannot arrest for civil defaults), and asks for payment to a personal UPI ID. Real notices are sent via post or official email.
Who is the Principal Nodal Officer for AU Small Finance Bank?
The Principal Nodal Officer is Mr. Deepak Babber. He can be reached at pno@aubank.in or 0141-6660654. His office is located at AU Small Finance Bank Limited, Bank House, Jaipur.
Can I get a loan after settlement?
Immediately after settlement, it is difficult to get unsecured loans. However, you can rebuild your credit score over 12-24 months by using secured credit cards or gold loans responsibly. Once your score improves, you can qualify for loans again.
Does AU Bank harass borrowers for payment?
While banks are entitled to recover dues, harassment (calling relatives, abusive language, late-night calls) is strictly prohibited by RBI guidelines. If you face this, you can file a complaint with the bank's Nodal Officer or the RBI Ombudsman.
What is the typical discount I can get in an AU Bank settlement?
Settlement amounts vary based on the case, but typically, borrowers can achieve waivers ranging from 30% to 50% of the total outstanding amount, especially if they make a lump-sum payment.