The Reserve Bank of India (RBI) has warned banks of consequences if they do not put an end to the unhealthy practice customer differentiation.

Expressing the central bank’s discontent over the practice of differential interest rates between high-value and small customers, deputy governor K C Chakrabarty said the practice leads to exploitation of customers from small & vulnerable sections.

He said some banks are offering higher rates for high-value customers, particularly those who deposit more than one crore. He added that banks are also differentiating on rates for deposits for different tenures.

Speaking on the topic, Chakrabarty said, “We are directing banks to curb customer differentiation. If they do not listen to us, we will see what should be the next step.”

Chakrabarty also said that banks should not deny an account to anyone who has a legitimate ID and clears KYC rules as it is necessary to provide more people with access to the banking system.

He also advised people not to choose gold as an asset for savings or investment. He argued that investments made in gold often end up in the hands of moneylenders or it most cases given away during a daughter's marriage. He added that India’s annual import of gold worth around $60 billion is one of the main reasons behind the persistent account deficit. Chakrabarty’s advice comes as gold surpassed Rs 32,000-mark per 10 grams, for the first time in India’s history.