Speaking at the CBI's Annual Conference on Monday morning, the Prime Minister publicly slapped down his Liberal Democrat colleague over the plan, saying: ""This was an idea that the Deputy Prime Minister first proposed but we are not proposing to go ahead with it.
To laughs, he added: "He has lots of good ideas. We have just decided not to go ahead with it."
In response, a spokesman for the Deputy Prime Minister told the Huffington Post UK that Clegg's proposal was "entirely different to the one from the Home Office".
He added: “Nick Clegg and the Liberal Democrats thought they could serve as an additional tool and safeguard for immigration officers when making borderline decisions. By contrast, the Home Office wanted it as an additional requirement on a much wider range of legal migrants.
“Ultimately, Liberal Democrats in Government were clear that we would not agree to the Home Office’s version of the policy. As a result, they have dropped it.”
It was reported on Sunday that the government's visa bonds plan, which were set to be launched later this month, would be shelved following a threatened revolt from Nick Clegg and condemnation from business leaders that it was "highly discriminatory".
Earlier this year, the Liberal Democrat leader said he would stop the plan if it was implemented in an "indiscriminate way". Clegg told BBC1's Andrew Marr Show: ''Of course in a coalition I can stop things'', and added: ''I am absolutely not interested in a bond which becomes an indiscriminate way of clobbering people who want to come to this country, and in many respects bring great prosperity and benefits to this country, of course not."
Nick Clegg originally floated the idea back in March of forcing immigrants from "high risk countries" to pay a £1,000 deposit once they leave the UK.
The scheme was part of the Government's drive to cut net migration into the UK to the ''tens of thousands'' by the time of the next general election in 2015.
Labour MP Keith Vaz, chairman of the home affairs select committee, described the scheme as ''unfair and discriminatory''.