The Blues have been tracking the Reds winger since the opening of the January transfer window but saw a reported £9 million bid rebuffed by the Merseyside giants at the start of the month.
Liverpool chief Rafael Benitez claimed Babel still had an integral to play at Anfield, but the 23-year-old has made just one substitute appearance since City's offer.
Babel, who announced his displeasure at being left out of a recent Liverpool squad on Twitter before apologising personally to Benitez, was originally not keen on a move to St Andrews.
But the player's agent has since revealed the Dutch international had a change of heart, with the World Cup on the horizon, but it appears Alex McLeish's latest bid to lure the former Ajax star to the West Midlands has been shunned.
Blues could still bring Aruna Dindane to the Second City, however, despite reports that the deal has fallen through.
Dindane was in Birmingham on Friday after the Blues agreed a £4 million deal for the Ivory Coast marksman but the move was believed to have broken down due to the player's demands.
But skysports.com understands a deal for the Lens striker - on loan at Portsmouth - is not completely dead in the water and talks are still ongoing.
City also remain confident on signing Roman Pavlyuchenko despite seeing a substantial offer turned down by Tottenham on Friday
The Russian striker appears to be McLeish's number one target before Monday's deadline
source skysport
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