The youngster is on the verge of completing a deal to the King Power Stadium.
The winger is on the verge of completing his £3.75m move to the King Power Stadium having passed a medical, but the Mail claims that a temporary return to his current club is not on the cards.
It is arguably a surprise that the two sides have not discussed the possibility of allowing Gray to stay as part of Gary Rowett's side until the end of the season. The 19-year-old has been impressive for the Blues this term, but his tally of one goal and one assist suggests that he still has some way to go before he is ready to make the step up to Claudio Ranieri's side, especially with Riyad Mahrez and Marc Albrighton performing so well currently.
Furthermore, Dele Alli's emergence into Tottenham's squad this season may have tempted Leicester to allow Gray to stay put for the time-being. Alli stayed with MK Dons for the entirety of last season despite completing a move to White Hart Lane midway through the campaign. The loan spell allowed the midfielder to continue his development before making the step up, and now he is an England international.
The lack of an agreement is also likely to have a negative impact on Birmingham's play-off hopes. Although he has not scored or created as many goals as a player of his potential perhaps should, his creativity will be missed, and may make the Blues much easier to play against.