In the present study, the effect of horizontal and vertical localization scales on the assimilation of direct SAPHIR radiances is studied. An Artificial Neural Network (ANN) has been used as a surrogate for the forward radiative calculations. The training input dataset for ANN consists of vertical layers of atmospheric pressure, temperature, relative humidity and other hydrometeor profiles with 6 channel Brightness Temperatures (BTs) as output. The best neural network architecture has been arrived at, by a neuron independence study. Since vertical localization of radiance data requires weighting functions, a ANN has been trained for this purpose. The radiances were ingested into the NWP using the Ensemble Kalman Filter (EnKF) technique. The horizontal localization has been taken care of, by using a Gaussian localization function centered around the observed coordinates. Similarly, the vertical localization is accomplished by assuming a function which depends on the weighting function of the channel to be assimilated. The effect of both horizontal and vertical localizations has been studied in terms of ensemble spread in the precipitation. Aditionally, improvements in 24 hr forecast from assimilation are also reported. © 2016 SPIE.