At least seven people died and about 150 people were missing after a ferry sank in Bangladesh in the early hours of Tuesday morning, officials said, adding that 35 survivors had been found.

Rescue workers began recovering bodies from the double-decker Shariatpur 1 ferry, which was hit by another vessel in the middle of the Meghna river just southeast of the capital Dhaka.

"The divers have brought seven dead bodies from the sunken vessel," Azizul Islam, the district administrator, told AFP by telephone, warning that the death toll was likely to rise as about 150 people were still unaccounted for.

Local police chief Shahidul Islam added that 35 passengers had been rescued by another ferry soon after the accident at about 2:30 am (2030 GMT Monday).

Coastguards, fire brigade and police rescue workers were also rushed to the scene.

The captain of the MV Mitali ferry, which picked up survivors from the river, told the ATN Bangla TV channel that "we stopped our vessel after hearing the cry of 'save us, save us'."

One rescued passenger, named as Dulal, told local media that eight of his relatives were missing. He said most people were asleep when the accident took place.

Other rescued passengers reported that the boat was overcrowded and was also carrying dozens of sacks of chillies.

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

The exact number of passengers on any ferry is often uncertain as passenger lists are not maintained properly and many people buy their tickets when they board.

The densely-populated and impoverished country of 150 million people is set on a delta of rivers that empty into the Bay of Bengal.

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.