Algal blooms are referred to overgrowths of algae in fresh or marine water systems and are caused due to various factors including natural physical and chemical processes and can have severe impacts on human health, aquatic life and even economy in some cases. They flourish in the presence of inorganic nutrients such as nitrogen and phosphorus. This study focuses on identification of algal blooms in inland waters and hence Chilika Lake of Odisha, India is considered as the study area. It is the largest brackish water lake in Asia which was designated as the first Indian wetland of international importance under the Ramsar Convention (1981) for its rich biodiversity. In October 2013, the ecosystem of the lake was affected by a severe cyclone named, "Phailin" leading to increased runoff resulting in the formation of algal blooms. This study has used remote sensing techniques to detect those algal blooms by utilizing satellite imagery which was obtained from EO-1, by the multispectral sensor Advanced Land Imager (ALI). A methodology has been developed by the combination of various image processing techniques like Principal Component Analysis and Normalized Difference Vegetation Index, which proved to be efficient in visualizing the spatial distribution of algal blooms on the lake surface.