Raw Rare Earth ore waiting to be processed (file photo); The report assessed that imports of rare earth magnets averaged $249 million in last four years.
| Photo Credit:
Nayan Sthankiya
Disruption in supply of rare earth can impact the financial exposure of banks to sectors such as transport equipment, basic metals, machinery, construction and electrical & electronics as also ancillary ones, according to SBI Research.
However, SBI Research, in its report emphasised that the vulnerability is also a function of available inventory of rare earth and disruption is not immediate uniformly across sectors.
The possible transmission mechanism to banks due to rare earth supply shock under aggravated scenario may include elongation of working capital cycle due to accumulation of semi-processed inventory, idle capacity etc.; volatility in demand due to output inoperability; and likely emergence of stress in both upstream and downstream sectors.
In this regard, the report also flagged the interlinkages from non-banking finance company (NBFC) sector to the banking sector; and export / trade uncertainties for committed yet unfulfilled obligations; both funds as also non-funds based (due to sudden restrictions).
The latest RBI’s Financial Stability Report has acknowledged that domestic financial system can be impacted by external spillovers and intensifying geopolitical hostilities.
“Since geopolitical factors decide the criticality of a mineral, the above analysis is one of the many dimensions of impact of geopolitical factors on banking,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.
The report assessed that imports of rare earth magnets averaged $249 million in last four years. In FY25, magnet imports were $291 million was highest in last four years.
Referring to the Government of India launching the National Critical Mineral Mission (NCMM) in 2025 to establish a robust framework for self-reliance in the critical mineral sector and PSUs and private firms being supported through funding, guidelines, and inter-ministerial coordination, the report underscored that critical minerals are an important business opportunity for banks that requires exclusive policy focus and strategic direction within banks.
Published on July 28, 2025
