A Board of Inquiry (BoI) is being constituted to investigate the circumstances which led to the mishap that occurred at around 3 AM at around 300 nautical miles from the Visakhapatnam coast.
"INS Kora has reported minor damages to her ship's side," a statment by the Navy said.
The navy said there has been no damage to the watertight integrity of the ship or any injuries or loss of life.
They said the accident occurred when merchant vessel Madelieine Rickmers, carrying a flag of Marshall Island, scraped INS Kora, a missile corvette.
The merchant vessel, a 23,000-tonne cargo ship, was coming from Chittagong in Bangladesh to Colombo.
Following the incident, the ship was stopped and a verification done by naval personnel.
The sources said it will be allowed to continue its journey once they get the written commitment from the ship's company that it will cooperate in the inquiry.
Earlier in 2011, India Navy warship INS Vindhyagiri had capsized a day after it collided head-on with a Cyprus flag merchant ship, M V Nordlake, near Sunk Rock Lighthouse off Mumbai harbour.
It was subsequently salvaged and then decommissioned on June 11, 2012.
Another accident was reported in 2006 when INS Prahar collided with a ship off the Goa coast.
The collision took place on April 21, about 10 nautical miles off Mormugao port when INS Prahar was returning to Mumbai after a routine exercise.
The other vessel, a Shipping Corporation of India ship, was on her way from Jawaharlal Nehru Port here to Colombo.
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