Business Secretary Vince Cable, a member of coalition partner Liberal Democrats, admitted the proposed scheme which has already triggered worldwide outrage would send out the "wrong message".
"It is very disappointing and it has not been agreed across the coalition and it seems to send the wrong message that Britain is closed for business," Cable told 'The Financial Times'.
"The operation for the visa scheme, together with the bonds on these Commonwealth countries is simply having the effect of driving bona fide visitors who want to spend and to do business in the UK to France and Germany," he added.
The Conservative-led government has been keen to cut immigration figures into the country and crack down on visa over-stayers.
Coalition partners Lib Dems had been in favour of a visa bond scheme as an extra route for people who have been rejected for visas. "It was never meant to apply to everyone," Cable explained.
The Home Office had been forced to re-look at its proposed pilot scheme to demand these hefty bonds with visitor visa applications from certain "high risk" countries, which are believed to include India, Pakistan, Bangladesh, Sri Lanka, Nigeria and Ghana.