The implementation of the New Labour Codes has led to a sharp rise in employee-related costs for private sector banks and insurance companies, pushing up operating expenses during the October–December quarter (Q3FY26). The impact follows the central government’s notification of the four Labour Codes in November 2025 and subsequent draft rules issued by the Ministry of Labour & Employment in December.
HDFC Bank, the country’s largest private sector lender, reported operating expenses of ₹18,770 crore in Q3FY26, up from ₹17,110 crore in the previous quarter. The bank disclosed an estimated incremental impact of ₹800 crore under employee costs for the quarter and the nine months ended December 31, 2025. It noted that the final accounting impact may evolve as Central and State rules are finalised and further clarifications are issued.
Other private lenders have also reported higher costs. ICICI Bank estimated a ₹145 crore impact on its profit and loss account in Q3FY26 due to the new labour norms. Yes Bank accounted for an incremental ₹155 crore, Federal Bank provided ₹20.8 crore, and RBL Bank estimated an additional impact of ₹32 crore linked to the changes.
Private sector insurers have similarly made additional provisions. HDFC Life Insurance charged an incremental ₹106.02 crore towards employee benefits to its consolidated revenue account. ICICI Prudential Life Insurance estimated an impact of ₹11.04 crore, while ICICI Lombard General Insurance reported an estimated ₹53.06 crore hit due to the new codes.
In contrast, public sector banks are largely unaffected, as their existing salary structures are already aligned with the revised framework, limiting the need for additional provisioning.
According to analysts, the new labour codes require a restructuring of salary components, including a higher share of basic pay and key allowances. This, in turn, increases employer contributions towards gratuity and pension funds, leading to higher long-term employee benefit costs.
The four Labour Codes — consolidating 29 existing labour laws — are expected to bring uniformity and transparency, but they are also reshaping cost structures across India’s private financial sector.
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