Left-arm spinner Panesar, not a member of the England Twenty20 squad currently competing in the Stanford Super Series in Antigua, had been cleared by the ECB to play for Bloomfield in a bid to gain more experience of bowling on sub-continental pitches.
However, following reports the ECB were unwilling to pay a fee of 7,000 pounds that Bloomfield were allegedly demanding for hosting Panesar, the board announced the 26-year-old would warm-up for the two-Test and seven ODI tour of India with the England Performance Programme (EPP) squad.
EPP players are due to travel to India in mid-November to attend a high performance camp.
"Further to recent media reports, the England and Wales Cricket Board can confirm that Monty Panesar will not be travelling to Sri Lanka to play for Bloomfield CC in the Sri Lanka Premier League as previously stated," an ECB statement said.
"The player was due to travel to Sri Lanka on November 2 to play a series of games for the club to get match practice ahead of joining the England squad for the forthcoming Test Series against India.
"It is now likely that Monty's preparation will be based around the England Performance Programme which includes a high performance camp in India scheduled from mid-November."
Many observers feel that Panesar, who made a bright start to his England career, has recently reached something of a plateau in form after taking 114 wickets in 33 Tests at an average of over 31 apiece.
Shane Warne, for example, believes Panesar should expand his repertoire of deliveries, with the Australia leg-spin great saying recently the Northamptonshire bowler was "one-dimensional".
The former Hampshire captain said: "I feel Monty is a little bit one-dimensional in how he bowls. He needs to bowl it high and wider, throw it up a little and bowl with more variety.
"I don't know if he can do that. It looks from the outside that he's only bowling one way. He needs to take some risks to take big wickets."
England are due to play the first of seven ODI in India on November 14 before two Tests in December in quick succession at Ahmedabad and Mumbai's Brabourne Stadium.