Solved!!!
In the 17763.2686 build machine, FIPS was enabled.
https://learn.microsoft.com/en-us/windows/security/threat-protection/security-policy-settings/system-cryptography-use-fips-compliant-algorithms-for-encryption-hashing-and-signing
It is observed that if the USB is formatted in FIPS disabled environment, then the recovery is disabled in FIPS enabled environment.
In such cases, even though the USB is unlocked with the password, it is write-protected.