As night fell, Paul asked Karthik for a drink but mispronounced his name and instead called him Cathar 'as a joke', although Karthik heard it as Qatar.
Karthik questioned who Paul was referring to and reminded him of his name before they got into a 'discussion' about the misunderstanding.
"Don't be a racist," Karthik told Paul.
"Don't call me racist! What a f**king d**k. What the f**k?!" Paul reacted.
He added: "All of a sudden the cider's kicked in and he's getting aggressive."
Later the pair had it out in the smoking area as Paul defended his original remark as a 'joke'.
"Don't ever play the racist card with me," Paul declared.
Karthik then said his comment about Paul being 'racist' was also a 'joke'.
Karthik later spoke in the diary room and says “Paul was calling me by the name of a middle eastern airline and I’ve not taken anything seriously, it’s fine, he was just joking.
"And I was joking back, 'Oh you're a racist'."
Elsewhere tonight, housemates Sam and Trisha continued to lock horns as housemates had to turn on one another in a new nominations twist.
Meanwhile, a 'boob off' in the garden didn't please everyone.
Jemma was sat in the living room with Sam, Paul, Jordan and Trisha and asking the guys “what is so scary about my t*ts”. Jordan responds, “they’re enormous” and Paul said: “they are f**king big” to which Sam asked: “what size are they?”.
Jordan asked Trisha what size her boobs are and she says “bigger than that but I’m a bigger girl, 36 triple F I think”. Paul said: “it’s a boob off, its official, it’s a boob off”.
Derek, Sandi and Shaun were then talking in the smoking area and discussing the events of the living room and Derek comments “I’m not against in any way, their moment is that they feel, they haven’t got these inhibitions, and the girls of our day they wouldn’t have gone there like that. I know it and you know it”
Celebrity Big Brother 2017 airs nightly on Channel 5.
The next episode airs Sunday night at 9PM.