The government is planning to exempt non-executive directors of banks and financial institutions from certain criminal liabilities like bouncing of cheques.
The decision will be implemented by the department of company affairs, but no timeframe has been given.
Government officials said the department and the banking and insurance division of the finance ministry had held consultations on the subject.
The high-level committee on corporate-auditor relationship had recommended that non-executive directors and independent directors should be exempted from provisions of the Negotiable Instruments Act, the Factories Act, the Provident Fund Act, the Employee State Insurance Act, the Industrial Disputes Act and the Electricity Supply Act.
The committee, headed by Naresh Chandra, had also recommended that non-executive directors be indemnified from costs of litigation.
"A professional may give excellent corporate advice that maximises long-term shareholder value, but he may not be aware of the rights, responsibilities, duties and liabilities of a legal, recognised fiduciary," the committee had said.
Officials said non-executive directors were not involved in the day-to-day management of companies and, therefore, were not responsible for small issues related to the running of a company.
They added that bank and financial institution nominees were prone to facing charges for offences in which they were not involved since they did not monitor day-to-day activities of a company.
Last year, the department of company affairs had exempted institutional nominees from certain provisions of Section 274 G of the Companies Act, 1956, which prescribed that all directors of "defaulting companies" were liable to prosecution and could be banned from taking up directorial assignments in other companies.
The amended section of the Companies Act termed companies that did not file their annual results and accounts for three years, beginning April 1999, as defaulting companies.
The category also included companies that had not honoured their interest commitment to small deposit holders and unsecured debenture holders, and had not paid dividends for more than one year.
Some financial institutions had withdrawn directors from the board of some companies, forcing the government to review its decision.
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