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Morning Briefing

Considering the major initiatives in countries like India and the widespread development of digital banking, the news that financial inclusion is gaining ground globally, according to a new report by the Brookings Institution in Washington, will surprise few.

The Brookings Financial and Digital Inclusion Project (FDIP) evaluates access to and usage of affordable financial services by the underserved in 21 countries. Countries are ranked on four dimensions of financial inclusion: country commitment, mobile capacity, regulatory environment, and adoption of traditional and digital financial services.

"Financial inclusion is really taking off. I think we have reached a tipping point," said Darrell West, one of the authors, according to the Financial Times.

Few countries are trying harder than India to boost financial inclusion, but the Reserve Bank of India's deputy governor, HR Khan, acknowledged on Sunday that these are challenging times for the Indian banking sector.

"The last two years had been challenging for the banking sector. Low credit growth, impairment of asset quality and lower profitability were the main issues," Mr Khan said, adding the acknowledgment that the banking will become more competitive following the licensing last week of 11 payments banks, with the licensing of small finance banks also due to be announced.

Mr Khan was speaking at the inauguration of Bandhan Bank, the first new commercial lender in India in more than a decade. Bandhan has 501 branches across the country, with plans to expand by 26 percent by March 2016. Bandhan started as a microlender and has some 14.3 million accounts, with a loan book of $1.6 billion.

Canada's 'Big Six' banks will report their quarterly financial results this week, and analysts are not sure that they will paint a pretty picture. Canada's economy has contracted for five months in a row and there are also concerns that the ongoing issue of Greece's position in the Eurozone and China's devaluation of its currency could impact on the six banks stock valuations. Tomorrow, Bank of Montreal will be the first of the six to issue its results.

Meanwhile, the People's Bank of China is planning a further infusion of liquidity to boost bank lending. The move will apparently see another reduction in Chinese banks' reserve requirement ratios — by a half percentage point, according to MarketWatch. This would be the third comprehensive reduction in the reserve requirement so far this year and would potentially release 678 billion yuan ($106.2 billion) in funds for banks to issue loans.

In further tales of woe for banks, the Sydney Morning Herald reports that Australia's big four banks have fallen by more than 20 percent from their 2015 peaks, with investors wiping more than A$85 billion off their combined market value this year.

And, in New Zealand, speculation is mounting that the country's major banks plan to sell Paymark, the electronic payments firm that runs the country's eftpos scheme, amid concern that consumers are deserting eftpos and opting instead for Visa and Mastercard scheme debit cards which can be used online. Paymark is owned in equal shares by Australian-owned New Zealand banks: ANZ, BNZ, Westpac and ASB.

In Saudi Arabia, the country's largest lender National Commercial Bank is reportedly selling two billion riyals [$533 million] of capital-boosting sukuk (sharia-compliant bonds). Trade Arabia reports that this would be the third such transaction by NCB since June and is part of its plan to raise seven billion riyals of capital before the end of the year.


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