NEW DELHI: The Reserve Bank of India (RBI) on Thursday maintained status quo on policy rate by leaving the repurchase rate (or repo rate ) unchanged at 6.25 per cent in its first bimonthly policy of FY18.The central bank kept the cash reserve ratio (CRR) unchanged at 4 per cent. However, it raised the reverse repo rate by 25 basis points to 6 per cent. RBI Governor Urjit Patel called it the central bank’s first line of defence to deal with a flood of liquidity in the system.Repo rate is the rate at which the RBI lends money to banks for a short term. On the other hand, Cash Reserve Ratio (CRR) is the percentage of the total deposits of customers, which commercial banks have to hold as reserves, either in cash or as deposits with the central bank.However, the central bank raised the reverse repo rate to 6 per cent. The most significant part of Thursday’s money policy review was the move to allow banks to invest in real estate investment trusts (REITs), which is seen as a huge positive for the real estate sector.Market watchers said real estate stocks and shares of home finance companies should see some bump-up following the money policy. Shares of DLF jumped 5 per cent to Rs 157 following the policy announcement.While the market was abuzz with reports of a new tool to squeeze the excess liquidity by replacing the SDF with the prevailing market stabilisation scheme (MSS), brokerage BofA-ML has time and again noted that there was no urgency for any such facility, given that 67 per cent of the Rs 500-1000 noted demonetised have already been withdrawn by the public to fund transaction demand.RBI also revised the MSF to 6.5 per cent from 6.75 per cent. The marginal standing facility is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.Investors were keenly awaiting measures to trim excess liquidity in the system. While a CRR hike could have entailed an additional cost for the banking sector since money is parked free of cost, the hike in reverse repo could lead to a shortage of government securities that act as collateral, Abheek Barua, Chief Economist, HDFC Bank.The reverse repo hike could also limit the overall amount of liquidity absorption.The domestic market recovered some of the losses following the policy announcement and the BSE Sensex was trading just 29 points down at 2.45 pm (IST).All members of the Monetary Policy Committee of RBI agreed to the policy decisions.Banks are also allowed in infrastructure investment trusts. MPC feels an unfavourable base effect is likely to put pressure on inflation projections in second half of FY18.MPC sees inflation at 4.5 per cent in H1 of FY18, at 5 per cent in H2.It was third time lucky for the bond market as RBI stopped short of tinkering with the CRR.The move to hike the reverse repo rate was the first line of defence for RBI, says Governor Urjit Patel.Patel says RBI will put NPA resolutions on firm footing. Liquidity surged in the system following the demonetisation drive. The RBI Governor said by the end of March, liquidity absorption was Rs 3.1 lakh crore.Patel said The RBI objective is to align money market with the money policy stance.RBI says it will need to manage liquidity for three-four quarters and may also go for open market operations, if necessary, to address the situation. The central bank expects the situation to normalise in three to four quarters. “But we will deploy the tool kit available if the situation demands,” said Deputy Governor Viral Acharya.“We will keep dealing with short-term liquidity as and when needed,” he said.RBI says cost of credit came down in third quarter.Farm loan waiver is a moral hazard, discourages an honest credit culture, and can even crowd out private borrower. Time to eshew loan waiver culture, said governor Patel.