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A former Tel Aviv negotiator has called for "200 enemy" to be held ransom every time an Israeli soldier is captured by militant groups, according to alleged recordings broadcast on army radio.

Lior Lotan resigned last week as a coordinator tasked with bringing Israeli soldiers held by Palestinian and Lebanese groups back to the country.

In the recording, he bemoaned the country's alleged lack of toughness in negotiations and hinted that Israel should take illegal steps to increase their bargaining power with groups such as Hamas and Hizballah.

"Israel should fill its wallet," Lotan is heard saying in the recording broadcast on Israeli army radio on Monday.

"If it's two [Israeli soldiers], then it should be two to 400 [enemy], if three, then 600. That doesn't mean the problems will be solved, but the formula will be different." 

The comments echo widely held beliefs in the military that captive Palestinians should be used as bargaining chips to bring home the bodies of Israeli servicemen and women, Haaretz reported on Monday.

Israel regularly negotiates with Hamas and Hizballah on exchanging prisoners and bodies.

Hamas is also said to be holding two Israeli civilians captive after they crossed the border into Gaza in two seperate incidents.

Tel Aviv is believed to have offered to exchange the men for a number of Palestinians are being held in Israel after crossing the border from Gaza, an offer Hamas rejected.

The Palestinian movement is in possession of the bodies of at least two Israeli soldiers killed in battle in Gaza, which could potentially be used in future negotations.

Israel holds bodies of Hamas militants and is believed to have buried the fighters on Israeli soil in deals.

Officially, Israel denies "trading" dead bodies, but Lotan appears to have admitted to the practice in the recording.

"After every conflict between fighting forces, the sides exchange prisoners and bodies.  That is the norm. Israel and Hizballah did it too before the Second Lebanon War an afterwards too."

In 2011, Israel traded over 1,027 Palestinian prisoners for the release of captive Israeli soldier Gilad Shalit, who was held in Gaza for five years.