diff --git a/lib_com/options.h b/lib_com/options.h
index a914c8e668570bea0fba57bf28685fd3efef420e..f50f2075af2431f7d4d41254fecfbd3e2d2202a0 100644
--- a/lib_com/options.h
+++ b/lib_com/options.h
@@ -100,6 +100,7 @@
 #define FIX_1009_OPT_PARAMMC_RENDER             /* FhG: Optimize ivas_param_mc_dec_render_fx() */
 #define FIX_1109_OPTIM_MCT_STEREO_IGF_DEC       /* FhG: optimize mctStereoIGF_dec_fx() */
 #define FIX_1110_OPTIM_DIRAC_DECORR_PROC        /* FhG: optimize ivas_dirac_dec_decorr_process() */
+#define FIX_1127_IMPROVE_SBA_MLD                /* Ittiam: Avoid saturation for DiRAC reference power */
 #define FIX_1100_REMOVE_LPC_RESCALING           /* VA: Remove the rescaling of LPC coefficient to Q12 as residu and syn-filt are already taking care of it*/
 
 #endif
diff --git a/lib_enc/ivas_dirac_enc.c b/lib_enc/ivas_dirac_enc.c
index 51a446d383139b0704527c62aaa3ca7bbc170f4a..4f471325edd215c5ef50ee9b2df714af176f1ca7 100644
--- a/lib_enc/ivas_dirac_enc.c
+++ b/lib_enc/ivas_dirac_enc.c
@@ -742,7 +742,21 @@ void computeReferencePower_enc_fx_dirac(
         *dirac_mono_flag = ivas_dirac_get_mono_flag_fx( band_grouping, Cldfb_RealBuffer, Cldfb_ImagBuffer, e_Cldfb, nchan_ana, mono_frame_count );
         move16();
     }
-
+#ifdef FIX_1127_IMPROVE_SBA_MLD
+    Word16 gb = 0;
+    move16();
+    FOR( i = 0; i < num_freq_bands; i++ )
+    {
+        brange[0] = band_grouping[i + enc_param_start_band];
+        brange[1] = band_grouping[i + enc_param_start_band + 1];
+        move16();
+        move16();
+        gb = s_max( gb, find_guarded_bits_fx( sub( brange[1], brange[0] ) ) );
+    }
+    e_reference_W = sub( 31, sub( add( shl( sub( 31, e_Cldfb ), 1 ), 1 ), gb ) );
+    e_reference_temp = e_reference_W;
+#endif
+    move16();
     FOR( i = 0; i < num_freq_bands; i++ )
     {
         brange[0] = band_grouping[i + enc_param_start_band];
@@ -758,12 +772,16 @@ void computeReferencePower_enc_fx_dirac(
 
         FOR( j = brange[0]; j < brange[1]; j++ )
         {
+#ifdef FIX_1127_IMPROVE_SBA_MLD
+            reference_power_W[i] = W_add( reference_power_W[i], W_shr( W_mult_32_32( Cldfb_RealBuffer[0][j], Cldfb_RealBuffer[0][j] ), gb ) );
+            reference_power_W[i] = W_add( reference_power_W[i], W_shr( W_mult_32_32( Cldfb_ImagBuffer[0][j], Cldfb_ImagBuffer[0][j] ), gb ) );
+#else
             reference_power_W[i] = W_mac_32_32( reference_power_W[i], Cldfb_RealBuffer[0][j], Cldfb_RealBuffer[0][j] );
             reference_power_W[i] = W_mac_32_32( reference_power_W[i], Cldfb_ImagBuffer[0][j], Cldfb_ImagBuffer[0][j] );
+            e_reference_W = imult1616( (Word16) 2, e_Cldfb );
+#endif
             move64();
             move64();
-
-            e_reference_W = imult1616( (Word16) 2, e_Cldfb );
         }
         reference_power_temp[i] = W_add( reference_power_temp[i], reference_power_W[i] );
         move64();
@@ -773,12 +791,16 @@ void computeReferencePower_enc_fx_dirac(
             /* abs()^2 */
             FOR( j = brange[0]; j < brange[1]; j++ )
             {
+#ifdef FIX_1127_IMPROVE_SBA_MLD
+                reference_power_temp[i] = W_add( reference_power_temp[i], W_shr( W_mult_32_32( Cldfb_RealBuffer[ch_idx][j], Cldfb_RealBuffer[ch_idx][j] ), gb ) );
+                reference_power_temp[i] = W_add( reference_power_temp[i], W_shr( W_mult_32_32( Cldfb_ImagBuffer[ch_idx][j], Cldfb_ImagBuffer[ch_idx][j] ), gb ) );
+#else
                 reference_power_temp[i] = W_mac_32_32( reference_power_temp[i], Cldfb_RealBuffer[ch_idx][j], Cldfb_RealBuffer[ch_idx][j] );
                 reference_power_temp[i] = W_mac_32_32( reference_power_temp[i], Cldfb_ImagBuffer[ch_idx][j], Cldfb_ImagBuffer[ch_idx][j] );
+                e_reference_temp = imult1616( (Word16) 2, e_Cldfb );
+#endif
                 move64();
                 move64();
-
-                e_reference_temp = imult1616( (Word16) 2, e_Cldfb );
             }
         }
     }
@@ -813,7 +835,11 @@ void computeReferencePower_enc_fx_dirac(
         reference_power[i] = W_extract_h( W_shl( reference_power_temp[i], min_norm ) ); // Right shift with min_norm and extract high bits
         move32();
     }
+#ifdef FIX_1127_IMPROVE_SBA_MLD
+    *e_reference = sub( 31, sub( add( sub( 31, e_reference_temp ), min_norm ), 32 ) );
+#else
     *e_reference = sub( e_reference_temp, min_norm );
+#endif
     move16();
 
     return;