How to create link libraries? Is there a way around to build link library repository on a drupal site, so that there can be one place to edit the links and changes will reflect in the instances used else where (like body field of a content type)

Any starting pointers?
I can't answer that exact question, but to solve that problem we typically use the Linkit module.

This will add an additional button to the WYSIWYG for creating links.  When you click it, you get a popup which lets you choose a link (somewhat similar to the entity reference autocomplete widget), and also set link options.

It will then build a link in the markup using a token.  When the page is rendered, the token gets replaced with the path alias for what you selected.  So, if the path for a node changes, the token replacement will take care of fixing everything.