Indian Prime Minister Modi shakes hand with Pakistan's Sharif

The brief moment of interaction between Indian Prime Minister Narendra Modi and his Pakistan counterpart Nawaz Sharif seems to have saved this year's SAARC summit at the last moment.

Analysts blame the bitter rivalry between the two nuclear-power neighbours for SAARC's failure to play a greater role in changing the region's fate.

The 18th summit began at Nepalese capital on Wednesday with the hope of signing agreements on regional cooperation on energy, road and railway connectivity.

However, Pakistan's opposition threatened to derail these three agreements on the opening day.

Since then, Modi and Sharif had been giving each other cold shoulders.

The fierce rivalry between the two nations helped China make its way into South Asia. But Modi's government has made it clear that developing "close relations" with its neighbours was India’s top priority.

The heads of member states were taken to Dhulikhel retreat outside Kathmandu before the beginning of Thursday's discussion. Prime Minister Sheikh Hasina skipped the meeting as she was ill, reports Sumon Mahbub, our Senior Correspondent travelling with the prime minister.

“It is here that Modi and Sharif held informal talks,” IANS reported quoting Nepalese Prime Minister Sushil Koriala's foreign relations advisor Dinesh Bhattarai.

The meeting apparently salvaged the SAARC summit from ending with nothing to show for as all eight countries clinched a last-minute deal to create a regional electricity grid.

Pakistan still refuses to ink the other agreements.

Koirala said the SAARC foreign ministers would meet again within next three months to discuss regional agreements on motor vehicles and railway service.

The summit at the opening session had sought the signing of two pacts on road and rail connectivity besides the regional electricity agreement.

Despite a free trade pact in force since 2006, high tariffs and restrictions on movement keep trade among South Asian nations limited to just five percent of their total trade, a Reuters report said.

Modi and Sharif, who came to power this year, also shook hands at the closing ceremony leading to wild applause from those present.

They were seen talking amicably as Hasina, Nepalese Prime Minister Koirala, Afghanistan President Ashraf Ghani, Sri Lankan President Mahinda Rajapaksa, Bhutan Prime Minister Tshering Tobgay and Maldives President Abdulla Yameen were on stage.

The two posed for the camera for about a minute while shaking hands, adds the Himalayan Times.

Sharif thanked the SAARC members for choosing Islamabad for its 2016 summit.

The two-day summit concluded after the Kathmandu Declaration was read out by Koirala.

"We have successfully held the summit," IANS quoted Koirala as saying during his speech at the closing ceremony.