There were 180 people aboard the Beringin Jaya, which sank on Thursday off the remote island of Kabaruang between Indonesia's Sulawesi island and the Philippines.
"There were so many people on that boat, and many people jumped on even way after the ticket booth was closed," Captain Alamsyah, a spokesman at the main North Sulawesi naval base in Manado city, said on Friday.
A navy officer said a large party on board was going to a wedding on Kabaruang.
Latest reports suggest 150 people survived the incident.
Officials said rescue operations were being hampered by the remote location and rough seas. Kabaruang is in the Sangihe Talaud archipelago, about 2500 km northeast of Jakarta.
Sinkings not uncommon
A huge number of ferries ply the waters of Indonesia, the world's largest archipelago. Sinkings occur periodically due to overcrowding or bad weather. The number of passengers a ferry is registered to carry is often much less than the actual number on board.
The worst boat accident in recent years in Indonesia, the world's fourth most populous country, took place in nearby waters in the Moluccas in June 2000 when an overcrowded vessel carrying almost 500 passengers, mostly refugees fleeing sectarian violence, sank in bad weather. Only 10 people survived.
In February 1999, only 20 people were rescued from a ferry carrying 325 passengers and seven crew, which sank in the South China Sea near the Tambelan islands, north of Jakarta.