"The Government has been considering whether we pilot a bond scheme that would deter people from overstaying the visa. We have decided not to proceed," a spokesperson for the British Home Office said yesterday.
The move comes ahead of Prime Minister David Cameron's third visit to India in last two years on November 14.
Cameron, who will make a day-long visit before heading to Sri Lanka to attend Commonwealth Heads of Government Meeting (CHOGM) on November 15-16, will hold talks with Prime Minister Manmohan Singh on key bilateral and regional issues.
India, which was one of the countries targeted with the bond, had expressed its concern to the UK government both at the ministerial and official levels.
The visa bond scheme, announced by Home Secretary Theresa May in June, was to come into force this month.
Hugo Swire, Britain's Minister of state for Foreign and Commonwealth Affairs said recently that "no decision was taken on the visa bond scheme".
The decision to scarp the scheme is thought to have been taken after Deputy Prime Minister Nick Clegg threatened to block it.
The aim of the scheme was to reduce the number of people from some "high-risk" countries - including India, Pakistan, and Nigeria - staying in the UK once their short-term visas expired.
Visitors would have paid a 3,000-pound cash bond before arrival in the UK that would have been forfeited if they failed make the return trip.