Party sources said Mr Sarwar had failed at the interview to convince the inquiry panel that he had no case to answer. A formal recommendation that he should lose his rights and privileges as a Labour MP is likely to be made on Monday and ratified by the parliamentary party on Wednesday.
Although Labour sources stressed the party's report into the case was not complete, there were reports yesterday that Scottish Labour Party staff may take over the running of his constituency party.
If the police fail to find hard evidence that the MP tried to bribe Badar Islam to "ease off" his campaign, or that he attempted to rig the polls, he could be reinstated.
Labour's principal disciplinary body, the National Executive Committee's organisation committee, will meet to discuss the case next week. A party spokesman said an internal inquiry into the case was not yet complete: "All comment upon its contents is therefore uninformed speculation. Any further meetings that take place this week concerning the inquiry will remain strictly private."
The MP has launched a libel action against the News of the World, which first made the bribery claims against him. One Labour source said he had not seen proposals temporarily to withdraw the whip from Mr Sarwar "written down" but would not rule out the inquiry reaching such a conclusion.
Mr Sarwar, a cash-and-carry millionaire who became Britain's first Muslim MP when he was elected on 1 May, has said the claims against him are "baseless, false and ludicrous". He has maintained the pounds 5,000 was a loan - made after the election - because Mr Islam was a fellow member of the Asian community in distress.