"India and China are capable of resolving issues through talks. There is no need for any arbitration," Modi said at the Council on Foreign Relations here in response to a question.
Asked if India would accept outside arbitration or adjudication to resolve the Sino-India border issue, the Prime Minister said, "there was no need for it as the two countries are talking to each other directly."
Modi said India wants to build friendly relations with all its neighbours.
His remarks came in the backdrop of a recent standoff in Ladakh region, where Chinese Army had made a fresh incursion.
External Affairs Minister Sushma Swaraj last week said that withdrawal of Chinese troops from the area will be completed by September 30.
India asserts that the border dispute covered about 4,000 km, while China claims that it confined to about 2,000 km to the area of Arunachal Pradesh, which it refers as Southern Tibet.
After 17 rounds of talks, India and China have moved forward to resolve the vexed issue.