FTSE down nearly 2 percent as Britain's banking index hits 7-year low

* FTSE 100 (NasdaqGS: Z - news) at lowest level in more than 3 years

* UK banking index hits seven-year low

* HSBC, StanChart (HKSE: 2888-OL.HK - news) down after Hong Kong market falls

* Rio Tinto (Other OTC: RTPPF - news) slumps after scrapping dividend policy

By Sudip Kar-Gupta and Atul Prakash

LONDON, Feb 11 (Reuters) - Britain's top share index slumped on Thursday, with a sharp sell-off in major banking and mining stocks pushing the market down to its lowest level in more than three years.

The blue-chip FTSE 100 index fell 1.9 percent to 5,564.89 points in later afternoon trading after falling to 5,499.51 points, the lowest level late 2012.

Banks were among the worst performers amid concerns about the industry's profitability in a low-growth, low-interest rate environment, with the UK Banks index sinking 4.4 percent to a seven-year low.

"Banks have been hit hard and further steep weakness can not be ruled out in the near-term. Margin pressure is becoming a big concern for the sector," said Jawaid Afsar, senior trader at Securequity. "Earnings results from some big banks have done little to revive investors' confidence."

HSBC and Standard Chartered (BSE: 580001.BO - news) , which have large operations in Hong Kong, fell more than 4 percent as they bore the brunt of a sell-off on the Hong Kong stock market that slumped due to persistent worries about a China growth slowdown.

Concerns about the pace of economic growth in China, the world's second-biggest economy and a major consumer of metals and oil, also hit mining and energy sectors.

The UK oil and gas index and the mining index dropped more than 2 percent. Miner Rio Tinto fell 3.9 percent, also after scrapping a generous dividend payout policy. A further fall in oil prices hit shares in BP, down 5 percent.

"The movement lower in crude oil and the ongoing concerns about the banks are hitting the market," said Beaufort Securities' sales trader Basil Petrides.

The general fears about a global economic slowdown drove investors over to the safe-haven asset of gold, and shares in gold miners such as Randgold and Fresnillo (Other OTC: FNLPF - news) both rose nearly 7 percent to outperform the slump on the FTSE 100.

The FTSE is down by around 10 percent since the start of 2016, and some 20 percent below a record high of 7,122.74 points reached in April (LSE: 0N69.L - news) 2015. (Reporting by Sudip Kar-Gupta; editing by Jeremy Gaunt)