New Labour Codes push up operating costs for private banks, insurers

Private sector banks and insurers report higher employee costs in Q3FY26 after accounting for statutory impact of New Labour Codes notified by the Centre in November 2025

The New Labour Codes, notified by the central government in November 2025, have pushed up employee costs for private sector banks and insurance companies, with these firms reporting higher operating expenses in the October-December quarter (Q3FY26) due to the statutory impact of the new labour codes.

 

HDFC Bank, the country’s largest private sector lender, reported operating expenses of ₹18,770 crore in Q3FY26, compared to ₹17,110 crore in Q2FY26. 

 

"The bank has recognised an estimated incremental impact of ₹800.00 crore under 'Employees cost' in the Profit and Loss Account during the quarter and nine months ended December 31, 2025, considering best information available. The bank continues to monitor the finalisation of Central and State Rules and clarifications from the Government on the New Labour Codes, and would provide appropriate accounting effects on the basis of such developments, as needed,” HDFC Bank said in its exchange filing.

 

Similarly, ICICI Bank estimated an impact of ₹145 crore to their profit and loss account in Q3FY26, due to the new labour codes. 

 

Yes Bank has also accounted for an incremental impact of ₹155 crore, while Federal Bank has made provision of ₹20.8 crore and RBL Bank estimated an additional impact of ₹32 crore, owing to the new norm.

 

Private sector insurance companies have also had to make additional provision owing to the new labour codes. 

 

HDFC Life Insurance estimated an incremental amount of ₹106.02 crore towards employee benefits, which has been charged to the Consolidated Revenue Account. ICICI Prudential Life Insurance estimated an incremental amount of ₹11.04 crore, and ICICI Lombard General Insurance has estimated an impact of ₹53.06 crore due to the new Labour Code. 

 

On the other hand, the salary structure of public sector banks was close to the new structure, and therefore they need not make any changes or additional provision towards the same. 

 

Analysts said, according to the new code, there will be a restructuring in the salary structure and there should be an increase in the share of contribution towards basic pay, and other key allowances. This would increase the amount that will be paid towards gratuity, and pension funds by the employers.

 

In November 21, 2025, the Government of India notified four Labour Codes — the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020, collectively referred to as the 'New Labour Codes', consolidating 29 existing labour Jaws.

 

The Ministry of Labour & Employment has published draft Central Rules and FAQs on December 30, 2025, to facilitate assessment of the financial impact arising from these regulatory changes. Accordingly, the lenders have estimated an incremental impact on their profit and loss accounts.