The fine blanking process is often used in plastic working to produce both simple details and those with complex shapes. This process consists in separating the material with the use of a tool that causes pressure on the shaped material, creating an appropriate state of deformation in the cross-section of the sheet and the cutting zone. The main challenge in the production lines is to obtain high-quality products with the optimal shape of the cut edge. Electrical steels are usually supplied as very thin sheets ready to be cut and blanked for use in the construction of stators and rotors for the cores of electric motors or as laminates for shielding and winding transformers. The presence of high silicon content in electrical steels together with their low thickness makes them susceptible to the formation of serious cut edge defects, such as: concentration of excessive deformations and stresses in the vicinity of the cut edge, excessive burrs, edge cracks. This condition results in a reduction of the magnetic efficiency in the final products.  A new approach to the design of the fine blanking process was proposed by optimizing the geometry of the punch, allowing for the reduction of contact pressures in the cutting zone and cut edge defects of electrical steel. By using the optimal blanking clearance, it is also possible to reduce the deformation zone concentrated near the cut edge. The proposed approach allows for extending the work cycles of the punches. FEM combined with the updated Lagrange description was used to describe the phenomena at a typical incremental step. The states of strain and strain rate are described by non-linear relationships without linearization. The description of the nonlinearity of the material was made with an incremental model taking into account the influence of the history of strain and the strain rate. The condition of the material after the previous treatments was also taken into account by introducing the initial states: displacements, stresses, strains and their velocities. An optimization process was carried out to determine the process conditions that would ensure the highest quality of the cut edge and the greatest durability of the cutting tools. The research results may be useful for the design of modern blanking tools used in the processing of electrical materials.