India will face one of the toughest struggles against diabetes in the region and will be the largest contributor to regional mortality with 9,83,000 deaths attributable to diabetes. Type-II diabetes mellitus (DM) is a major public health problem with more than 471 billion USD spent on healthcare for diabetes. The WHO predicts DM to become the seventh leading cause of death in the world by 2030. An estimated 3.4 million people have died from the consequences of high blood sugar in 2004. Out of all the deaths caused by DM, 80% of them occur in low and middle-income countries. DM is an expensive disease as per capita cost of managing the disease is 2-4 folds higher than the non-diabetics. Treatment costs increase with disease duration, presence of complications, hospitalization and urban settings. Healthcare expenditures on diabetes accounted for 11.6% of the total healthcare expenditure in the world in 2010. By 2030, this amount will exceed USD 490 billion. The direct cost on diabetes healthcare is usually very high for people in developing countries. Present study focuses on studying economic impact of DM in urban and rural field practice area of Sri Siddhartha medical college and examining of the financial coping mechanisms.OBJECTIVES: 1.To estimate the total expenditure incurred by Diabetics and its socio economic impact on their families. 2.To estimate the magnitude of Catastrophic Hospital Expenditure (CHE) due to type-II Diabetes Mellitus. 3. To assess the financial coping mechanisms of households with Type-II Diabetes mellitus.MATERIALS AND METHODS: The cross sectional study was conducted in urban and rural field practice areas of Sri Siddhartha Medical College in Tumkur. 180 study subjects each from urban and rural field practice area were included in the study and systematic random sampling method was used to include the study subjects . RESULTS:Mean total diabetic expenditure was higher among urban study subjects at 778 rupees per month while it was lesser among the rural study subjects which was 285 rupees per month. This was statistically significant. Total monthly indirect diabetic expenditure was higher among urban population (190 rupees ) as compared to rural study subjects who spend around 145 rupees .This was also statistically significant . Catastrophic hospital expenditure was experienced by 27 % of study subjects, higher in urban area (30%) than rural area (24%). Mobilising savings and using cash were the commonest coping up strategies adopted by diabetics. CONCLUSION:Mean total direct cost incurred by diabetic study subjects per month was higher in urban area (778 Rupees) than rural areas( 285 Rupees) .Diabetics from both urban and rural areas spend most on purchase of oral medication (64% and 61% respectively). Mean indirect cost of diabetes per month was higher in urban areas (190 rupees) than in rural area (145 rupees) with major indirect loss coming from loss of wages. Catastrophic hospital spending was experienced more by urban area diabetics (30%) than among rural diabetics (24%). However catastrophic hospital spending increased among hospitalized study subjects from both urban and rural area (84% among urban and 83% among rural areas).