Indonesian authorities say four people are confirmed dead and 292 have been rescued after a ferry sank in Indonesia.

The Dumai Express was caught in bad weather as it was travelling from Batam Island to Pekanbaru in Sumatra.

It sank about 10:00am (local time), in the area where Australian customs ship the Oceanic Viking was anchored for almost a month.

The ship's manifesto listed 213 passenger and 13 crew as being onboard.

There are many other boats in the area and fishermen have reported seeing many people in the sea.

While authorities are hopeful many people will be rescued as lifejackets are thrown to survivors, it is also true many Indonesians never learn to swim.

Sea transport director-general Sunaryo says the ship's capacity was only 273 passengers and an investigation was underway to determine if overloading contributed to the accident.

"If it was overloaded that's against the rules and we won't tolerate that," he said.

"We will investigate if the ferry was fit to sail and if its documents were complete. We'll also check whether the ship's captain and port master went ahead despite the bad weather or if the weather changed."

Travel in large and small fast ferries is the main means of transport between the Riau Islands, Sumatra and Singapore.

About 335 people were killed in January when a ferry sank off Indonesia's Sulawesi Island.

In December 2006 a ferry went down in a storm off the coast of Java, killing more than 500 people.

- ABC/AFP