Private sector banks and insurance companies are feeling the cost impact of the Centre’s new labour codes, with several large players reporting a sharp rise in employee-related expenses in the October–December quarter (Q3FY26).
The four labour codes, notified by the central government in November 2025, have led to changes in salary structures and higher statutory contributions by employers. As a result, many private lenders and insurers have had to make one-time provisions, pushing up operating expenses during the quarter.
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 said it had recognised an estimated additional impact of ₹800 crore under employee costs during the quarter and the nine months ended December 31, 2025.
In its exchange filing, HDFC Bank said the estimate was based on the best information currently available and added that it continues to monitor the finalisation of central and state rules, along with further clarifications from the government. Any future developments, the bank said, would be accounted for as required.
ICICI Bank also flagged the impact of the new labour codes, estimating an additional charge of ₹145 crore to its profit and loss account in Q3FY26. Yes Bank accounted for an incremental impact of ₹155 crore, while Federal Bank made a provision of ₹20.8 crore. RBL Bank estimated an additional cost of ₹32 crore due to the new norms.
Private sector insurers have reported a similar rise in employee benefit expenses. HDFC Life Insurance said it has charged an incremental ₹106.02 crore towards employee benefits to its consolidated revenue account. ICICI Prudential Life Insurance estimated an additional ₹11.04 crore, while ICICI Lombard General Insurance reported an impact of ₹53.06 crore linked to the new labour codes.
In contrast, public sector banks are largely insulated from the changes. Their existing salary structures are already close to the requirements under the new codes, and therefore they have not had to make significant additional provisions.
Analysts said the new framework requires a higher share of basic pay and key allowances in the overall salary structure. This, in turn, increases employers’ contributions towards gratuity, provident fund and pension benefits, leading to higher long-term employee costs.
The four labour codes — covering wages, industrial relations, social security, and occupational safety and working conditions — replace 29 existing labour laws. To help companies assess the financial impact, the Ministry of Labour and Employment released draft central rules and FAQs on December 30, 2025. Based on these guidelines, banks and insurers have begun factoring the additional costs into their financial statements.