Shares of RBL Bank fell as much as 5.9% on Monday to Rs 146 on the BSE after the lender reported an 86% year-on-year (YoY) decline in net profit to Rs 33 crore for the December quarter, down from Rs 233 crore in the same period last year, mainly due to issues in its microloan portfolio.The private sector bank, which has faced challenging quarters because of higher credit costs, reported a net profit of Rs 231 crore in the September quarter.The bank’s core net interest income increased by 3% YoY to Rs 1,585 crore, while other income rose by 38% to Rs 1,073 crore, boosted by the sale of its stake in NBFC DAM Capital.CEO and Managing Director R. Subramaniakumar explained that the net interest margin (NIM) fell to 4.90% from 5.52% a year ago, with 0.40% of this decline attributed to microfinance exposures. The bank’s microfinance portfolio saw slippages surge to Rs 535 crore, compared to the usual Rs 125-150 crore, due to factors such as borrower over-leverage and a national campaign that decreased borrowers' repayment willingness. Additionally, a specific community in two districts of Karnataka showed reluctance to repay.Despite these challenges, Subramaniakumar noted that collection efficiency improved to 97% in December, up one percentage point from the first two months of the quarter. He mentioned that it could take up to two more quarters for the microfinance segment to stabilize, but the share of microfinance loans in the overall portfolio may decline to around 6.5% from over 7% in December.The bank also highlighted that its credit card business, with significant exposure, may take time to normalize, with net slippages standing at Rs 533 crore. The overall gross non-performing assets (NPA) ratio rose to 2.92% in December from 2.88% in September, driven by higher slippages of Rs 1,309 crore, up from Rs 666 crore a year earlier.The bank’s management expects NIMs to stabilize and return to the 5% range within two quarters. As of December 31, 2024, the bank’s capital adequacy ratio was 15.4%, and management confirmed there are no new fundraising plans at this time.Shares of the company have fallen 42% in the past one year, meanwhile, they have plunged 55% in the last five years. According to Trendlyne, RBL Bank has worse 1 year returns than its sector, Nifty50, Sensex and industry.