The Victorian Government has pulled a pre-budget, pre-election move that few suspected – selling its Rural Finance Corporation to invest in rail upgrades.

The Rural Finance Corporation has been in state ownership for 65 years, and was originally founded to help returning soldiers set up farming operations.

It will be sold to the Bendigo and Adelaide Bank for $1.78 billion, as the state government looks to take advantage of the Federal Government's 15 per cent incentive payments for privatisation.

The Rural Finance Corporation has a rural lending portfolio worth $1.69 billion.

With the corporation about to be privatised, some farmers say they face uncertainty over continued funding of a vital program.

The Rural Finance Corporation has been responsible for the Young Farmer Finance Scheme, which provides emergency funds after disaster events and low-interest loan support.

Vice-president of the Victorian Farmers Federation and Murra Warra farmer, David Jochinke has said it is unclear what will happen with a privatised bank, but has called for the grant allocations to be maintained.

The incentive for the sale comes from the Commonwealth’s new asset recycling initiative, which sees the federal government reward state bodies for selling their public assets.

The Victorian Government says the proceeds from the sale will be spent on upgrading rail tracks in regional areas, which Nationals Leader and Minister for Rural and Regional Development Peter Ryan says will be around $400 million.

The Murray Basin Rail Project is one of the plans in the pipeline, slated to cost around $220 million.

It will convert broad gauge tracks from Mildura to Geelong to standard gauge, allowing heavier trains to travel to port with greater loads and at higher speeds.