The Argentine goalkeeper has emerged as one of the Citizens’ top targets amid growing concerns surrounding Joe Hart’s form.
The England stopper has endured a shaky start to the new Premier League season, with various errors costing the club valuable points.
City boss Manuel Pellegrini worked with Caballero at Malaga last term and is known to be a big fan of the 32-year-old.
A move for his signature was mooted over the summer, but a formal deal failed to materialise.
Malaga’s financial struggles have led to the sales of a number of star players over the past few seasons, including now Arsenal duo Santi Cazorla and Nacho Monreal.
But, Caballero has hinted that he will not be leaving the club.
“I had a lot of offers in the summer. There were many possible moves in the team and I was not the exception. Now I am calm and doing well in Malaga,” he told Radio Marca.
“There is a [release] clause, of course. But most of my colleagues who went to other teams say they regret having left.”
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