The attorney general's office said it needed more time to investigate Yingluck's involvement in the controversial scheme, which became a clarion call for protests against her now toppled government.
"There is not enough evidence to take legal action against former Prime Minister Yingluck as accused by the National Anti-Corruption Commission (NACC)," Wanchai Rojanawong, a spokesman for the attorney general's office, said at a press conference in Bangkok.
The attorney general will form a joint committee with the NACC to gather more evidence before deciding whether to charge her, he said, without specifying when it would make a decision on an indictment.
Just a day after she was removed from office, the NACC indicted the former leader for dereliction of duty in relation to the rice policy, later forwarding the case to the attorney general's office to consider criminal charges.
Yingluck's deeply divisive elder brother Thaksin, a billionaire former premier, lives in self-exile to avoid jail for a corruption conviction.
The rice subsidy, which paid farmers up to 50 percent above market rates for the grain, was criticised for punching a hole in Thai finances, battering the rice industry and fostering massive corruption, with opponents accusing Yingluck of using it to shore up her rural electoral base.
A member of her Puea Thai party legal team said they had asked for more witnesses to be questioned.
"We are ready to fight the case," Singtong Buachoom told AFP.
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