Type 2 Diabetes mellitus is a chronic metabolic disorder with complications of microangiopathies, macroangiopathies, neuropathy and nephropathy. Metformin is often the first line treatment in type 2 diabetes. There is evidence of a higher prevalence of vitamin B12 deficiency observed among patients on metformin. It is believed that Metformin may cause vitamin B12 malabsorption which aggravates neuropathy and anaemia. Methods A cross-sectional study was designed with randomly selected type 2 diabetes patients attending a tertiary diabetes clinic in Southern India, recruited over a period of 3 months, divided in 2 groups (control and study groups) based on their use of metformin. They were assessed for serum B12, Folic acid levels and mean corpuscular volume. Clinical manifestations of neuropathy, anaemia and vitamin B12 deficiency were documented on clinical examination. Results There were 100 patients recruited, showing those on metformin had a higher prevalence of vitamin B12 deficiency (58.3% vs 33.3%, p<0.05), however, folic acid deficiency was lower (16.7% vs 37.5%, p<0.05). Conclusion Patients with type 2 diabetes on metformin required protocols for monitoring and replacement of vitamin B12 as necessary, to prevent onset of neuropathy.