At about the beginning of the seventeenth century when armies were adopting the regimental system, it was decided to assign colours (using the word in its conventional sense) to each regiment. It was logical, then, for the “Red Regiment,” for example, to carry a red flag for identification in battle. Hence military flags became known as “Colours.” Another explanation of the term is that early heraldic flags bore the Colours of a commander in precisely the same sense as used in horse racing today. On the other side of the world, in about 1650, the first of the Manchus was experimenting with a new concept of military organization. He divided his troops into four groups - the Yellows, Reds, Whites and Blues. Each were identified by a coloured banner. Later he doubled the number of units, having each new unit take one of the original four colours and adding a border. So the Colours originated as a means of battlefield identification and continued to perform this function for many years. Modern armies now carry Colours only in ceremonies.
Presently, there are two types of Colours in the SAF - known as the State Colours and the Regimental Colours. Regimental Colours are awarded to the Formation or Units about five years after its formation. They bear the appropriate crests / logos of the respective Division / Formation / Unit. Previously, State Colours were awarded to Units two years after they were awarded the Regimental Colours. However, in 1997 the Armed Forces Council decided that State Colours would only be awarded to the Services and SAFTI Military Institute, it being an international institution. Formation and Units would only be awarded the Regimental Colours. The State Colours incorporate the design of the State Flag with the Service Crest emblazoned at the bottom right hand corner of the Colours. When placed side by side, the State Colours and the Regimental Colours signify the pride and loyalty of the Servicemen to their Service / Formation / Unit.
Extracted from: Our Army: Customs and Traditions - MINDEF Singapore