capital adequacy, asset classification and provisioning apply to such lendings, implying thereby that the quality of the credit portfolio was to be maintained and the soundness of institutions was not compromised with even as financial inclusion was promoted. the concept of no frills accounts with low or zero minimum balance was introduced in 2005 to enable a larger section of the poor and under - priviledged section. simpler kyc norms were introduced for this section of society with a view to ensuring that people without documentary proof of address and / or identity are not deprived of banking facilities while at the same time ensuring that the minimum requirement for the proper identification of each customer is complied with. the recently introduced “ aadhar ” project by the unique identification authority of india ( uida ) will, by providing a clear proof of identity for all residents, pave the way for the entry of under - priviledged citizens into the formal banking system within the ambit of prevalent regulation. following the recommendations of the khan committee, reserve bank of india paved the way for branchless banking ( through the business correspondents / business facilitator model ) in 2006 in recognition of the fact that it would be difficult to provide access to banking facility for every household in around 600, 000 villages in the country through brick & mortar branches. simultaneously, sufficient safeguards in the form of biometric identification of customers, guidelines for the appointment and functioning of agents, including stipulation of distance criterion from a base branch, same or next day accounting of customer transactions and adherence to the risk mitigation norms for outsourcing of activities have been put in place from the perspective of consumer protection to address the risk of reckless selling of products and services by agents working to earn commission. non - banking and non - financial entities have been permitted into the financial inclusion space in a calibrated manner largely to help banks in offering customized payment and remittance services to customers with adequate safeguards. payment services operated by the nonbanks were brought under regulation of the reserve bank of india after the notification of the payment and settlement systems act, 2007 and the broad approach has been that these entities will provide fee based services without obtaining access to customer funds ( for example, mobile wallets provided by non - banks through the mechanism of the escrow account with a bank ). the self help group - bank linkage program introduced in the 1990s facilitated the formation of tremendous synergies between the formal financial sector and the informal sector

standards, the three local banking groups are still rather small, despite having made some regional acquisitions and undergone domestic consolidation. the largest of them, dbs group, ranks only 96th in the world in terms of assets. the banks are also mainly singapore banks, rather than regional players with strong presence in several countries. possibilities for domestic growth are limited, other than by further consolidation. but countries in the region like india and korea are opening up their financial sectors to foreign participation, and other regional and global players are starting to explore these opportunities. the local banks would be conscious of these industry trends. does size matter to the local banks? there are differing views. one view is that it does, because economy of scale is increasingly important. the pursuit of size in the global financial industry has been underway for several years, and despite some less - than - successful mergers overseas, is still on - going. the most recent merger between bank of america and fleetboston financial would create the second largest us bank with total assets of nearly us $ 1 trillion and operations across 34 countries. in this view, size also enables a bank to diversify across geography and products, which gives it a much stronger base. this is the way the industry is moving. if singapore banks do not make it to be significant regional players, at least, then they risk being marginalised, and perhaps eventually being absorbed by other players. however, there are others who maintain the contrary view. they hold that size is not essential for banking or financial industry success. there exist successful smaller players who excel in particular markets or specialised areas of expertise, and singapore banks can be among these. furthermore, banks can only expand as fast as they can grow their business or assimilate new acquisitions. overrapid expansion can result in weaknesses and mistakes, and turn a small but strong operation into a large but vulnerable one. it is up to the singapore banks and their shareholders to consider these opposing arguments and continually reassess their strategies. they will need to decide whether they need further scale to compete effectively, and if so whether it should be achieved through consolidation at home, expansion and acquisition abroad, or a combination of both. mas cannot make this judgment for them, though the continued strength of our banking system depends on their making the right judgment call. whatever the outcome, we need a core of strong local banks, as the stability of our financial system hinges on that. overall, the prospects for our financial centre look good. last year,