The boat was among those deployed for patrolling off Mumbai.
"Prompt fire fighting actions taken by the duty staff prevented the fire from spreading to other boats in close vicinity," a navy official said.
However, two other boats suffered damage and water seeped inside them when the fire was being doused.
The two boats are submerged in shallow waters inside the naval harbour area, said officials.
"Efforts are in progress to salvage the boats," the official said.
"Prompt action by all concerned ensured that there was no loss of life or collateral damage to other naval assets in the harbour," the official added.
A Board of Inquiry has been ordered into the incident.
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