New Delhi, Jan. 24 -- Hope is around the corner for millions of small businesses struggling with debt, with the Union budget likely to propose longer repayment timelines, penalty waivers and a digital platform to ease loan restructuring.

The union ministries of finance and MSME are updating the decade-old framework for revival and restructuring (FRR) for micro, small, and medium enterprises (MSMEs), two people aware of the plan said. The new framework, called FRR 2.0, is aimed at supporting MSMEs by easing their access to finance, the people said on condition of anonymity.

When a loan repayment misses due date, the bank marks it as a special mention account (SMA-0). Once the delay crosses 30 days and 60 days, it is tagged SMA-1 and SMA-...