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Rangers chief executive Charles Green on Tuesday hit out at anti-discrimination organisation Show Racism the Red Card after it accused him of using "racist and offensive" language.
Green admitted in a Sunday newspaper interview that he calls his business partner Imran Ahmad, a former Rangers director, "my Paki friend".
His words drew a stern rebuke from Show Racism the Red Card chief executive Ged Grebby, who said: "The comments of Charles Green are very ill-advised and someone in his public position should really know better than to use this kind of racist and offensive language.
"The use of the term 'Paki' is highly offensive and it is something that we at Show Racism the Red Card are trying to educate young people against."
But Green responded in a statement: "It is unfortunate that Show Racism the Red Card has fallen into the trap of taking something out of context and giving a knee-jerk reaction.
"In the interview, I referred to the fact we are now living in a politically correct world where words and phrases that were once used are no longer acceptable.
"My use of the word 'Paki' was when I was referring to how I sometimes warmly address my colleague and friend Imran Ahmad when we meet, something we both know is light-hearted.
"I deplore racism and sectarianism and this football club does a huge amount of work in this area to help eradicate these problems."
Rangers, winners of the Scottish league title on 54 occasions, recently celebrated winning the Third Division, having been demoted to Scotland's fourth tier after going into administration at the end of last season.