Earlier, Modi shook hands warmly with his Pakistani counterpart Nawaz Sharif as they sat down for bilateral talks here on the sidelines of the SCO summit, more than a year after they held talks on May 26 in New Delhi.
The talks are expected to provide forward movement to bilateral ties.
All issues, including terrorism and trade, are expected to be on the table when the two leaders meet.
Modi and Sharif, who arrived here on Thursday, met informally at a dinner hosted by Russian President Vladimir Putin on Thursday night. Both leaders exchanged pleasantries.
The constant firing on the border is likely to feature in the talks, especially as a BSF trooper was killed in cross-border firing on Wednesday.
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The release of 26/11 mastermind Zakiur Rehman Lakhvi is to be taken up too.
Ways of boosting trade could figure.
Modi and Sharif met in November last year during the SAARC Summit in Kathmandu, but they did not hold any bilateral meeting.
The two leaders had held a bilateral meeting on May 26 last year during the swearing-in of Modi.
The meeting comes as both countries are set to be absorbed as permanent members into the Shanghai Cooperation Organisation grouping.