Vince Cable has criticised plans to make some overseas visitors pay a £3,000 “security bond” to enter the UK.
The business secretary said Home Secretary Theresa May was wrong to set the bond at such a level, which he said had caused “outrage” in India.
He called for a more “sensible and flexible” approach.
He also said he had “some sympathy” with Sarah Teather who is to quit as a Lib Dem MP over the party’s stance on immigration and other policies.
But he said the former education minister had “over-reacted” and there was a “positive story to tell” about Lib Dem achievements in government.
Brent East MP Miss Teather told The Observer she had decided not to stand at the next election because visa bonds for “high risk” visitors – first suggested by Lib Dem leader Nick Clegg – had left her feeling “desolate” and “catastrophically depressed”.
Mr Clegg first floated the idea of cash bonds to be paid by visitors from “high risk” countries in March.
But Mr Cable claimed the deputy prime minister’s plan, which suggested a bond of £1,000, had been deliberately misinterpreted by some of their Conservative cabinet colleagues.
“What Nick Clegg said was if somebody in the Indian sub-continent, for example, was turned down for a visa, they could, as an alternative, come up with a bond,” he told BBC Radio 4’s Today programme.
“And had that proposal been accepted I think most people would not have seen a problem with it. It would actually make it easier for some people to come who had good reason to do so.
“But the way some of our colleagues interpreted was in a much more negative way, of saying that everybody who comes here should pay this very large bond and that’s what Sarah reacted against.”
He said both he and Nick Clegg would be arguing in government for a “much more sensible and flexible” approach to the policy, which had yet to be finalised.
And he claimed Theresa May’s version of the plan would harm relations with important trading partners such as India.
The bond idea, to be piloted from November, is aimed at deterring people from “high risk” countries staying in the UK once their short-term visas expire.
It has been reported that visitors from India, Pakistan, Sri Lanka, Bangladesh, Ghana and Nigeria will be required to deposit £3,000 ($4,600) for a six-month visa, to be forfeited if they don’t leave when they should.
Mrs May says the problem of so-called “overstayers” was one of the biggest challenges facing the immigration system and they want to target visitors from certain countries who present the greatest risk.