India’s tier-2 cities can be hubs for global capability centres serving the financial sector

For years, financial services GCCs have concentrated in tier-1 cities like Bangalore, Hyderabad and Pune. But with rising real estate costs, intense talent competition and urban fatigue setting in, firms are eyeing a new frontier: tier-2 and tier-3 cities.

The recently announced National Framework for GCCs in the Union Budget 2025–26 is a timely nudge in this direction, offering 16 measures aimed at infrastructure, talent, and regulatory reform. While these incentives can support growth, a city must have a strong supporting ecosystem to truly be GCC-ready. If India wants to turn its emerging cities into magnets for global financial services players, we must move beyond policy and build cities that people and businesses actually want to move to.

Talent may come, but will it stay?

The first myth to debunk is that a steady supply of fresh graduates is enough. It isn’t. The real value for Financial Services GCCs lies in mid- and senior-level talent—seasoned professionals who can lead transformation agendas, drive innovation and mentor growing teams. To achieve this, tier-2 cities need a thriving third-party ITeS ecosystem that can serve as a natural hiring ground for financial firms. In addition, universities must collaborate with industries to design courses aligned with the needs of modern financial services and technology-driven roles.

Cities that fail to create a strong local talent pipeline will struggle to scale their GCCs beyond initial setups. Senior professionals, particularly those in the 35–40+ age group, will not relocate to a city without the essential infrastructure to support their families. A high standard of living, good schools, top-tier healthcare, safe housing and cultural life are non-negotiables. If a city can’t support the life that talent aspires to, it won’t attract—or retain—the people who power GCCs.

This holds true not just for tier-2 cities like Jaipur and Coimbatore, but even more so for tier-3 cities like Bhubaneswar, Indore or Vishakhapattanam, where civic infrastructure and lifestyle amenities need accelerated development to compete.

Cities don’t scale in isolation

Talent also needs access. Without strong transport links—domestic and international—no city can hope to be a serious contender. Daily commutes within cities should be painless. Flying to Mumbai or Singapore for a board meeting shouldn’t feel like a cross-country expedition. And yet, the focus often stops at airport expansion. Connectivity is also about digital infrastructure, integrated public transport and regulatory ease. Public transport systems such as metro transit systems and efficient road networks can significantly enhance daily commute experiences, making the city more appealing to professionals and businesses alike. These aren’t nice-to-haves. They’re the table stakes.

It’s time to ditch the cost-first mindset

Let’s face it: cost arbitrage isn’t a sustainable strategy. The GCCs of today aren’t back offices. They are innovation engines driving automation, risk transformation and digital product development. For tier-2 and tier-3 cities to become serious hubs, they must stop being seen as cheaper replicas of tier-1 cities—and start being built as complementary extensions.

Financial firms will bet on a city based on more than what’s just ‘affordable.’ What they want is an ecosystem that fuels innovation—through research institutions, fintech hubs, startup communities and deep-tech collaborations.

Bangalore and Hyderabad didn’t become technology powerhouses by relying on cost advantages alone. They invested in education, deep-tech and fintech ecosystems that allowed them to evolve beyond IT services into high-value innovation hubs.

Even tier-3 cities, once overlooked, are beginning to show promise as specialized hubs—particularly for digital operations, automation support and regional service centres. But for that to work, these cities must evolve from service centres to strategic ecosystems—with academia, startups and government working in lockstep.

Innovation is the new benchmark

Cities that house premier universities and research centres naturally develop tech and fintech talent. Without this intellectual infrastructure, cities risk being seen as outsourcing hubs rather than centres of innovation. The maturity of the local startup ecosystem also plays a pivotal role as technological advancement can make cities more attractive to high-calibre professionals and global businesses alike.

A smart model? Use tier-1 cities for high-value innovation and transformation work. Once a process matures and becomes repeatable, move it to a tier-2 or tier-3 city like Jaipur, or GIFT city—that combines cost-efficiency with growing talent depth. This hybrid setup can reduce costs by up to 25%, while tapping relatively stable talent pools suited for standardized functions with low rates of attrition.

Call to action

The National Framework marks a promising beginning—and now’s the time to build on that momentum. With the right partnerships, local governments can turn policy into progress.

Financial firms have an opportunity to co-invest not just in office parks, but in the broader community infrastructure that attracts and retains talent. And for industry leaders, this is a moment to reframe the narrative. Tier-2 and tier-3 cities aren’t secondary options—they’re the next wave of strategic growth.

Manoj Marwah is financial services GCC consulting services, and Sumit Singh is partner, business consulting, EY India.

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}