Updates dateline to Brasilia, adds context in paragraphs 3-7, requests for comment in paragraph 8

SAO PAULO, Sept 3 (Reuters) - Brazil's central bank has rejected state-controlled bank BRB's BSLI3.SA purchase of peer Banco Master, BRB said in a filing seen by Reuters on Wednesday, bringing an end to a deal that had come under intense scrutiny in recent months.

"In light of the central bank's denial, the contract will be terminated in accordance with its terms and conditions," BRB said, referring to the deal announced in late March.

The deal, initially valued at around 2 billion reais, would have given BRB 49% of Banco Master's common shares and 100% of its preferred shares, for a total stake of 58%.

The proposed acquisition had drawn scrutiny as the two lenders are of similar size, and Master had expanded rapidly in recent years through an aggressive funding model based on high-yield debt distributed via investment platforms.

The central bank had been assessing whether BRB, controlled by the government of the Federal District, had sufficient capacity to support the new capital structure.

Antitrust regulator CADE had already cleared the deal, which was later narrowed after BRB said it would exclude further assets, including financial products linked to Master's fast-growth strategy.

A source close to BRB said the bank will request access to the central bank's decision and weigh next steps to address any risks identified by regulators.

Master, BRB and the central bank did not immediately respond to requests for comment outside business hours.

($1 = 5.4212 reais)

(Reporting by Marcela Ayres and Luciana Magalhaes; Editing by Kylie Madry)

((Isabel.Teles@thomsonreuters.com;))