It was a belated Valentine's Day party for young British South Asians and it promised to bring a community together for a night of fun.

Expectations were high as we waited to get in – queueing up has never been this enjoyable and it came through in the self-deprecating banter.

“I'm amazed there isn't a terrorist alert in the area,” quipped one humorist; “It's past eight, why aren't the doors open? Oh, wait, it's an Asian event," joked another.

A white journalist walked to the door and there were hoots: “Are you tonight's entertainment?” a call went out from a young man amused that, for a change, Asians were the ethnic majority.

Waiting, one got a sense of a united community, comfortable enough to laugh at they way they're stereotyped.

But on entering the party, it was a different story. At the door was a table with ribbons, colour-coded according to religion – orange for Sikhs, red for Hindus and green for Muslims. And at the back of the venue was a corner for speed-dating, also divided into three sections on the basis of religion.

Squinting in the darkened room, people walked around looking for ribbons matching their own. Once found, conversation ensued. As a result, throughout the evening reds spoke to reds, oranges to oranges and greens to greens.

One woman who wasn't wearing a ribbon was repeatedly asked about her religious affiliation. If her answer wasn't the 'right' one, men moved away. After this happened five or six times, she turned to me and asked crossly, “Have you ever heard such a chat up line?”

“It's appalling,” said a young Hindu woman who did not wish to be named. “We are all here for an evening of fun and these coloured tags are so blatantly divisive – I've only spoken to Hindu people tonight”. Jag Singh, a Sikh man, agreed with her and added: “You'd think there'd at least be a little subtlety about it, but these tags are completely over the top."

The fact that there is no homogenous South Asian community in Britain is not news. Indeed, a substantial amount of research has gone into how British Asians are internally divided, forming their own micro-communities on the basis of country (Indian, Pakistani, Bangladeshi), language (Gujarati, Punjabi, Hindi, Bengali etc), and religion (Hindu, Sikh, Muslim).

But if this party was any indicator, it seems as if religion has come to be the dominant basis for these divisions. As one of the organisers said: "We've got the tags colour-coded because a lot of people have complained to us about how they don't want to speak to people of other religions, and we find that [these tags] are the best way to make things clear."

The South Asia Solidarity Group (SASG) is a campaigning organisation that works towards building a united South Asian community in Britain. The SASG's biggest challenge is the increasing religious divide within the British Asian community.

Dr Kalpana Wilson, a member of SASG, says that this has to be understood in political terms, rather than in religious or cultural terms. She says that there are South Asian and British political groups that claim to represent communities, but in effect actively promote these divisions.

"New Labour has clearly encouraged people to identify increasingly with so-called 'faith communities', through funding etc. This is a continuation of the British state's long-term policies of creating divisions wherever possible ... there's speed-dating in Bombay, too, but it's not colour-coded,” she adds.

Religious divides have become so internalised that a sizeable number of people at the party thought that colour-coded tags were a great idea. “It's all very well having friends from other religions,” said Sonia, a Sikh woman from Leicester. “But when it comes to relationships or marriage, it's got to be with someone from the same background. And let's face it – this is a singles party with only one outcome in mind”. Another woman, Shazia Malik, said: “We're all Asians, but we're all different. So while we can be at a party together, we should be able to choose who to speak to”. Did she enjoy the night? “Yes, but there were not enough Muslim men – so I didn't see any prospects”.