Need Suggestion - HDFC Personal Loan Pay or Not Pay as single borrower got passed away?

Hello Everyone , Here I am seeking advice on my brother in law's HDFC bank Personal Loan . 
He has taken loan 3 years back and died due to cardiac arrest 6 months back. The EMI from his saving account was continued till 4 months i.e. until his saving account balance went to zero. Thre total loan amount is around 5 L but pending due as of now is near to 2.60L. 

There was HDFC Ergo Insurance attached with loan but sadly it works only in case of accident. As per their defination sudden cardiac arrest without any hospitalization is natural death only and not accident hence insurance claim got rejected. Still on Bank's request they have raised new claim in Critical illness category and paid 1L to Loan account. Now the Due is around 1.6L , Bank is asking us to pay that with 50% settlement i.e. 80k. 

Should we pay that or forgot about it? As per internet personal loan i.e. unsecured loan on single person name does not hold any responsibility on legal heir i.e. my sister. 

Do anyone from us have seen similar situation? I don't want my sister to be harassed by recovery agents in case we don't pay it. Till date we received many calls but when we tell our condition they take death certificate copy and doesn't call back. but that happened 2-3 times.