The Victorian Government will sell the Rural Finance Corporation to Bendigo and Adelaide Bank for $1.78 billion.

The Government expects to realise net proceeds of $400 million and the funds will be earmarked for infrastructure spending in rural and regional areas.

Making the announcement the day before the state budget, Treasurer Michael O'Brien called it an "excellent outcome for rural and regional Victoria".

The Rural Finance Corporation (RFC) offers loans to the rural sector and administers schemes on behalf of the Commonwealth and Victorian governments.

The sale includes the RFC's loan book which is valued at approximately $1.695 billion and the sale is to be completed by mid-July.

The bank has promised to maintain the RFC's 11 branches, branding and staff for a period of three years.

Bendigo and Adelaide Bank managing director Mike Hirst said the purchase reflected the bank's commitment to supporting rural and regional customers.

"This transaction brings together two iconic Victorian businesses, both with long and proud histories of serving farmers and communities," he said.

"The Rural Finance business and strategy aligns perfectly with our community values and long-stated goal of being the most customer-connected bank in Australia."

Deputy Premier Peter Ryan says money from the sale will be spent on developing a business case for the Murray Basin Rail project to standardise the rail from Mildura to Geelong.

"Through this fund of money we are now able to build this project," he said.

Mr O'Brien says they rejected Labor's plan to sell a 99-year lease and will instead sell a 40 year lease. ( ABC TV )

"This has been sought by regional communities particularly in the north-west of the state and western Victoria more generally for literally decades."

Mr O'Brien says they received advice that it was not appropriate to go to public tender for the sale because, for example, the company might be broken up.

"There were some risks if we were to go out to the market broadly and publicly," he said.

But Opposition Leader Daniel Andrews has serious concerns about the process.

"Who sells a $400 million asset without even going to tender?" he asked.

'No better asset than the Port of Melbourne'

The Government has also confirmed it will sell a 40-year lease to privatise the Port of Melbourne.

But the Treasurer would not reveal how much he expects to reap from the sale.

Mr O'Brien says money from the port lease will also be used for infrastructure spending.

"When you see the sorts of results that have been achieved with the Port of Botany, Newcastle recently, a transfer of equity in the Port of Brisbane, this is the right time to be getting into the market in relation to a port," he said.

"There is no better asset than the Port of Melbourne. It is the jewel in the crown.

"It is a great asset and we're very confident this process will help us with the development of (the port of) Hastings and help us fund significant infrastructure for Victoria."

The Government expects both sales announced today will qualify for an extra 15 per cent from the Federal Government under its asset recycling incentives.