"With India, free trade and investment ... Has to move in tandem with progress on overall relations with the two countries, and the main issue is ... Kashmir," Aziz said during an official visit to Hong Kong.

"Progress on free trade and investment will be lined to progress on the issue," he said.

But Aziz said once the dispute is resolved, there is good potential for trade ties between the neighbours.

One possible move is to allow banks in each country to open branches in the other, he said.

"State Bank of Pakistan is very keen and we want to do it in parallel (with India), so the moment we get a green signal that the Reserve Bank (of India) is ready to trot we will," Aziz sad.

Aziz said the proposal would start out in the Pakistani financial centre of Karachi and its Indian counterpart Mumbai.