Finance minister Nirmala Sitharaman is all set to present the union budget on February 1. This will be the third budget prepared amid the challenges thrown by the COVID-19 pandemic.

Expectations are running high, especially across industries that have been hit hard by the pandemic like MSMEs. Lockdowns and restrictions worsened the liquidity issues that MSMEs were already grappling with. So, what can the finance minister do?

CNBC-TV18 has learnt that the government may extend the Emergency Credit Line Guarantee Scheme (ECLGS) for one year till March 2023. Besides that, the government is also likely to ask Reserve Bank of India (RBI) to consider reopening the debt restructuring window for MSMEs to help alleviate their financial stress.

Also Read: Budget 2022: Banks seek 1-year extension of ECLGS for MSMEs, relaxed eligibility criteria for wider reach

Rating agency Fitch expects stresses in the MSME and microfinance segments to culminate in higher NPLs, particularly as tightened impairment recognition norms come into effect by March 2022.

The RBI in its latest Financial Stability Report released at the end of December had warned that there are emerging signs of stress in the MSME segment, which called for a closer monitoring of the portfolio.

Also Read: Budget 2022: Here’s what MSME sector is expecting from FM Nirmala Sitharaman

To discuss the road ahead for MSME sector, CNBC-TV18 spoke to Indranil Pan, Chief Economist at Yes Bank; Ajay Sahai, DG & CEO of FIEO and HP Kumar, Member of Executive Committee at FICCI CMSME.

Watch video for more.