SOURCES within the RUC have indicated that loyalists will be given permission to hold a band parade at the weekend beside the Catholic church at Harryville in Ballymena, Co Antrim.
Saturday Mass-goers have been picketed by loyalists outside the church for the past five months.
However, a police spokesman said no decision had yet been taken on Saturday's planned parade. The RUC had pledged to preserve the peace and protect Mass-goers at Harryville, the spokesman said.
The SDLP has warned that a decision to allow the march could have potentially dangerous implications and that the police could face serious crowd-control problems.
The Harryville Residents' Association has applied for permission to hold the demonstration on Saturday evening. Twenty-two bands are due to take part in the parade, which will pass Our Lady's Church during Mass.
The crowd will then be addressed by several speakers at a location near the church. Loyalists have been holding a picket outside the church since September in protest at nationalists who blocked Orange marches in the village of Dunloy, Co Antrim, last year.
Police sources said they believed the parade would be given the go-ahead. Despite the location of the Catholic church, Harryville is a Protestant area with few Catholic residents.
It is understood the RUC believes it would be difficult to defend a ban on the parade, given the demographic make-up of the district.
The SDLP has described the proposed parade as irresponsible and said that it will inevitably increase sectarian feeling in the town. Yesterday a party representative, Mr Sean Farren, repeated his appeal to the organisers to rethink their plans, which he described as provocative.
He said the police had enough problems controlling the normal group of protesters outside the church without the added difficulty of bandsmen.
The DUP leader the Rev Ian Paisley, yesterday met the Northern Secretary, Sir Patrick Mayhew, in an attempt to secure permission for an Orange parade in Dunloy.
Dr Paisley described his meeting as positive and said he believed there had been movement towards the resolution of the issue.
The DUP supports Saturday's parade in Harryville, but Dr Paisley appealed to marchers to pass Our Lady's Church "quietly" or else to hold their rally after Mass was over.
Meanwhile, loyalists in the Ormeau Road area of south Belfast have begun boycotting Catholic businesses.
Posters have been put up in the area saying: "Protestants Unite! Boycott Roman Catholic Pan-Nationalist Shops and Business. Fight Back."
It is believed the campaign is in support of Harryville loyalists and in protest at nationalists in the lower Ormeau Road area for their opposition to Orange parades.
Ms Pauline Gilmore of the loyalist group, Ormeau Residents Demand Equal Rights (ORDER), said she knew nothing of the posters.
The Lower Ormeau Concerned Community group accused loyalists of attempting to inflame sectarian tensions in the area.
"This is an extremely worrying and sinister development," a spokesman, Mr Gerard Rice, said. He urged loyalist and unionist parties to condemn the boycott.
It was also criticised by the Irish Republican Socialist Party and the Workers' Party.
