Sources in the PCB told PTI that before leaving for India with the Lahore Lions team for the Champions League Twenty20, Shehzad was called to the Board offices and given a severe reprimand for making religious comments to Dilshan after the third ODI in Dambulla last month.
"Shehzad was told by the three member inquiry committee that they were accepting his explanation that he had made the remarks on a personal level to Dilshan because of their relationship," one source said.
The PCB formed the inquiry committee after saying that Shehzad had violated a clause of his contract which clearly states that players should not make religious or political comments to anyone in public or while representing the national team.
"Shehzad was only given permission to go with the Lahore Lions team after he promised to be on his best behaviour in future and to avoid such unnecessary controversies," the source said.
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The incident under investigation took place as the two players walked back after the match with the video footage showing Shehzad telling Dilshan "if you are a non-Muslim and you turn Muslim, no matter whatever you do in your life, straight to heaven".
Shehzad was also heard saying "then be ready for the fire" after a reply from Dilshan which was not audible.
22-year-old Shehzad, who has played five Tests and 48 ODIs, has a history of getting into trouble with the establishment over disciplinary issues and he was first reported for indiscipline while representing Pakistan Under-19 team in the ICC Youth World Cup.