The retrieval augmented generation (RAG) system such as RETRO has been shown to improve language modeling capabilities and reduce toxicity and hallucinations by retrieving from a database of non-parametric memory containing trillions of entries. We introduce RETRO-LI that shows retrieval can also help using a small scale database, but it demands more accurate and better neighbors when searching in a smaller hence sparser non-parametric memory. This can be met by using a proper semantic similarity search. We further propose adding a regularization to the non-parametric memory for the first time: it significantly reduces perplexity when the neighbor search operations are noisy during inference, and it improves generalization when a domain shift occurs. We also show that the RETRO-LI’s non-parametric memory can potentially be implemented on analog in-memory computing hardware, exhibiting O(1) search time while causing noise in retrieving neighbors, with minimal (<1%) performance loss. Our code is available at: unmapped: uri https://github.com/IBM/Retrieval-Enhanced-Transformer-Little