Party sources said a decision is being taken "very soon" on the candidate and a local could be asked to face BJP's Prime Ministerial candidate.
Rajesh Mishra, who had represented the seat from 2004-2009, and Ajai Rai are the two local contenders for the party ticket for the constituency which goes to polls on May 12.
Party leaders have earlier declared it would field a "formidable" candidate against Modi and there was no question of supporting any other party in the seat. AAP convenor Arvind Kejriwal is also contesting from the seat.
Amid speculation that Congress is seriously considering him as a candidate against Modi in Varanasi , senior party leader Digvijay Singh has said no one in Congress has so far broached the issue to him. The AICC general secretary at the same time said he is "prepared" to fight from any parliamentary, including in Varanasi, against Modi "if the party desired so." The party has already fielded AICC General Secretary Madhusudan Mistry, a close aide of Rahul Gandhi, to take on Modi in Vadodara, the second Lok Sabha seat from where BJP's prime ministerial candidate is contesting.