New Delhi/Mumbai, Sept. 25 -- To crack down on surging online financial frauds such as 'digital arrests', a parliamentary panel has recommended that banks use government-issued IDs to trace, freeze, and blacklist mule accounts siphoning crores of rupees. Experts call it a crucial first step, but banks warn implementation will be difficult.

Discussions have begun at ministerial levels to understand how the recommendations by a parliamentary standing committee on home affairs can be implemented to reduce the extent of online financial frauds in India, said officials with direct knowledge of the matter.

"One proposal. has been to freeze all accounts linked to an ID (such as Aadhaar or PAN) in case a fraudulent transaction is detected. The ...