In this study, efforts are made to improve the simulation of heavy rainfall events over National Capital Region (NCR) Delhi during 2010 summer monsoon, using additional observations from automatic weather stations (AWS). Two case studies have been carried out to simulate the relative humidity, wind speed and precipitation over NCR Delhi in 48-h model integrations; one from 00UTC, August 20, 2010, and the other from 00UTC, September 12, 2010. Several AWS installed over NCR Delhi in the recent past provide valuable surface observations, which are assimilated into state-of-the-art weather research and forecasting (WRF) model using the three-dimensional variational data assimilation (3DVAR). The quality of background error statistics (BES) is a key component in successful 3DVAR data assimilation in a mesoscale model. In this study, the domain-dependent regional background error statistics (RBS) are estimated using National Meteorological Center method in the months of August and September 2010 and then compared with the global background error statistics (GBS) in the WRF model. The model simulations are analyzed and validated against AWS and radiosonde observations to quantify the impact of RBS. The root mean square differences in the spatial distributions of precipitation, relative humidity and wind speed at the surface showed significant differences between both the global and regional BES. Similar differences are also observed in the vertical distributions along the latitudinal cross section at 28.5°N. Model-simulated fields are analyzed at five different surface stations and one upper air station located in NCR Delhi. It is found that in 24-h model simulation, the RBS significantly improves the model simulations in case of precipitation, relative humidity and wind speed as compared to GBS.