Royal Bank of Scotland is planning to transfer thousands of its small business customers to a separate division because it cannot make a profit out of them.

The move will lead to some of them being treated more harshly than other customers, according to bankers who have contacted The Times.

In an internal memo sent to senior staff in RBS’s small and medium-sized business division last week and seen by The Times, managers were instructed to divide customers into two camps. Some will be put into the bank’s “core” division, and others will be relegated to a “noncore” category.

The memo says that among the customers who should be considered for the noncore area are those on the most competitive loan deals, which RBS offered at up to 2 per cent above the Bank of England base rate.

Although RBS sold these loans to customers, the bank concedes that they are “not profitable”. Customers who will be most affected by the creation of the noncore division are those who have taken out loans on property, the memo says.

RBS, which is 70 per cent controlled by the Government, says in the memo that “new lending to noncore customers will only be provided once the existing debt has been restructured or repriced”. This is likely to mean that affected customers will not be able to tap RBS for any more funding unless they agree to a higher rate on their existing loan. In turn, if they approach another bank they will probably have to disclose that their application for a loan has been rejected.

The process of deciding how to categorise customers is at an early stage. The memo says: “There is no need to advise customers of these changes at the moment.”

A spokesman for the Federation of Small Businesses praised RBS for meeting the needs of smaller companies in recent months but said that it would be “hoodwinking” businesses to syphon some of them off into a second division. “RBS should take the hit,” the spokesman said. “If businesses have got a good deal, RBS should respect that.”

The memo emphasises that all customers must be treated according to the Financial Services Authority’s principles of “treating customers fairly”. The document also makes clear that customers with several loans and other products with the bank will be considered core even if one or two of their loans are unprofitable.

RBS said in February that it would create a noncore division into which it would put £240 billion of assets from across the bank. These will be run off or sold over time.

A spokesman for RBS said yesterday that the process would not affect how customers were treated. “It is an internal exercise which will have no impact on current lending agreements with our customers or on day-to-day relationships,” the spokesman said. “However, it is an important next step in our plans to return RBS to financial health over the next three to five years.”

The memo says that in the case of noncore customers, managers must focus on “restructuring or repricing debt rather than on funding for new investment”.

Even in the case of core customers, RBS is likely to try to raise the price of their loans when they come up for renewal in an attempt to boost profits.

Angela Knight, of the British Bankers’ Association, said that the banking industry was “doing much more detailed assessments of customers to help them through the recession”. She added that several banks had promised not to foreclose on mortgage customers who have fallen into trouble.

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