At least 32 people drowned when a ferry sank in Bangladesh before dawn on Tuesday with scores more bodies feared trapped inside the capsized vessel, officials said.

Rescue workers began removing fatalities from the double-decker Shariatpur 1 ferry, which was hit by an oil barge in the middle of the Meghna river, 40 kilometres (25 miles) southeast of the capital Dhaka.

"Divers have recovered 32 dead bodies from the sunken vessel including at least five women and two children," local deputy police chief Tariqul Islam said at the scene, adding the death toll was likely to rise.

"One diver pulled out the dead body of a woman cradling her dead daughter to her chest," he said.

The rescue operation continued into the night under floodlights as emergency teams struggled to lift the ferry to the surface and bring it to the river bank to complete the search.

"We tried to drag it up but it was too heavy to move as it had a cargo of hundreds of sacks of chilli on board as well as passengers," navy Commander Gulzar Hossain, who is leading the operation, said.

"Another rescue vessel is expected to join us in a couple of hours. The ferry was tilted on its side and we fear a lot of dead bodies are stuck inside," he said.

About 200 passengers were thought to be on the ferry, but the exact number was uncertain as manifest lists are seldom maintained properly and many travellers buy their tickets when on board.

"As soon as the ferry started to sink with a loud noise, we woke up from sleeping," said survivor Rina Begum, standing near the accident site.

"Everyone was screaming. I jumped through a window, but my husband could not. I was rescued by a vessel one and a half hours later. I have 15 relatives missing. We were part of a wedding party."

Thousands of people, including the distraught family and friends of victims, crowded the river's edge as bodies were carried from the water.

Mahbubul Alam, secretary of the Inland Water Transport Authority, said the vessel, which was built in 1991, appeared to have sunk rapidly after the collision.

"We talked to a rescued passenger. He told us that the vessel sank in minutes after it hit the other vessel, giving most passengers no chance to swim to safety," he said.

An investigation has been ordered, he added.

Police said that about 35 passengers had been rescued by a passing ferry, the MV Mitali, soon after the accident at about 2:30 am (2030 GMT Monday).

The Mitali's captain told the ATN Bangla TV channel: "We stopped our vessel after hearing the cry of 'Save us, save us'."

Other rescued passengers reported that the Dhaka-bound ferry was weighed down with cargo and badly overcrowded after three days of route cancellations.

Two passengers, Khalid Hasan and Liton Mia, told the Prothom Alo newspaper website that they survived by swimming to a fishing trawler.

Bangladesh, a densely-populated and poverty-stricken country of 150 million people, is set on a delta of rivers that empty into the Bay of Bengal.

Boats are the main form of travel in its remote rural areas and accidents are common due to lax safety standards and overloading.

In April last year 32 people were killed after a passenger vessel sank in the Meghna river after colliding with a cargo ship. At least 85 people drowned in 2009 when an overloaded triple-decker ferry capsized off Bhola Island in the country's south.

Naval officials have said more than 95 percent of Bangladesh's hundreds of thousands of small and medium-sized boats do not meet minimum safety regulations.