The pleasantries were "usual" in nature and were exchanged when the two Prime Ministers were in the Leaders' Lounge along with leaders of other SCO member countries, the sources said, insisting that it cannot be construed as a "meeting".
This is the first such interaction between the two Prime Ministers, who were here to attend the SCO Summit, amidst the chill in bilateral relations, triggered by the terror attack on a CRPF convoy in Pulwama in February.
Earlier, addressing the Summit, Modi made a veiled attack on Pakistan as Khan listened, saying the countries which "promote, support and fund" terrorism must be held accountable.
On Thursday, Modi had told Chinese President Xi Jinping that his country's "all-weather friend" Pakistan must take concrete action against terrorism.
The Prime Minister told the Chinese President that India has a consistent policy that all issues between India and China should be discussed through a bilateral mechanism, Foreign Secretary Vijay Gokhale told mediapersons after the meeting on the sidelines of the SCO Summit.
"We look for a peaceful settlement (with Pakistan) through negotiations," Gokhale quoted Modi as telling Xi.
The Prime Minister told Xi that he had made efforts to build cordial relations with Pakistan but those were "derailed", the Foreign Secretary said.
"The Prime Minister did inform President Xi that Pakistan needs to create an atmosphere free of terrorism and that at this stage we do not see it happening," Gokhale said.
"Therefore, we expect Pakistan to take concrete action on the issues that India has proposed, the areas of concerns that we have flagged to Pakistan. And Pakistan should take concrete action in this regard," the Foreign Secretary quoted Modi as telling Xi.
India has maintained that it cannot have talks with Pakistan until terrorism emanating from that soil comes to an end.
The clear message given by Modi to Xi assumes significance against the backdrop of the consistent efforts made by China, which considers itself as "all-weather friend" of Pakistan, to stall an international attempt to proscribe Masood Azhar by the UN Security Council till recently.
China, one of the five permanent members of the UN Security Council, finally relented to allow the world body to sanction Azhar on May 1.
China relented under intense international pressure, particularly built by the US and France, in the aftermath of the ghastly terror attack by the Jaish-e-Mohammed on a CRPF convoy in Jammu and Kashmir's Pulwama district on February 14, in which 40 personnel were killed.
India retaliated to that attack by carrying out air strike at JeM terror camps in Balakot in Pakistan on February 26, after which military tensions escalated for some time.
( With inputs from IANS )