Pakistan are poised to fulfil their T20 World Cup fixture against India on Sunday, having previously been instructed by their government to boycott the game in a move that could have cost the sport millions.

The crisis was triggered by Bangladesh withdrawing from the tournament last month – their place handed to Scotland – when a request to play their matches outside India on security grounds was rejected by the International Cricket Council.

In an act of solidarity the Pakistan government, led by the prime minister, Shehbaz Sharif, then stated Pakistan would forfeit the game against India in Colombo – a potentially damaging move given the fixture’s centrality to the ICC’s £2.2bn ($3bn) broadcast deal.

But after talks between the ICC, the Pakistan Cricket Board and the Bangladesh Cricket Board in Lahore in the past few days – plus representations from the co-hosts, Sri Lanka – the impasse has been broken.

As part of the deal, Bangladesh will face no censure for the withdrawal and have been handed hosting rights for a future ICC tournament, while Pakistan will drop their intended boycott of the India match.

The Pakistan government on Monday evening said: “This decision has been taken with the aim of protecting the spirit of cricket, and to support the continuity of this global sport in all participating nations.”

The ICC said: “It was agreed that all members will respect their commitments as per the terms of participation for ICC events and do all that is necessary to ensure that the ongoing edition of the ICC men’s T20 World Cup is a success.”

Aminul Islam, the president of the BCB, had earlier requested the match between India and Pakistan go ahead “for the benefit of the entire cricket ecosystem”.

He said: “We are deeply moved by Pakistan’s efforts to go above and beyond in supporting Bangladesh during this period. Long may our brotherhood flourish.”