@PratikSavla - Thanks for the question and using MS Q&A forum.
It sounds like you're experiencing an issue with the automatic application of sensitivity labels in SharePoint Online. Here are a few steps and considerations that may help diagnose and resolve the issue:
- Policy Synchronization Delay: Sometimes, there can be delays in policy synchronization. Though five days is quite long, it's worth verifying if the synchronization is pending. You can check the status in the Microsoft 365 compliance center.
- Label Publishing: Ensure that the sensitivity labels are published correctly. Go to the Microsoft Purview compliance portal, and under Information protection, check if the labels are published and the policy is applied to the correct users and groups.
- Site and Library Settings: Verify that the default sensitivity label is set correctly for the specific SharePoint site and document libraries. Navigate to the library settings to confirm that the default label is configured.
- Permissions: Make sure the users have the necessary permissions to apply sensitivity labels. If users do not have sufficient permissions, labels may not be applied automatically.
- Compliance Center Logs: Check the activity logs in the Microsoft 365 compliance center to see if there are any errors or warnings related to the sensitivity labeling process.
- Manual Application: Try applying the label manually to see if it works. If it does, it might indicate an issue with the automatic application process rather than the label or policy itself.
- Recreate Policy: In some cases, recreating the sensitivity label policy from scratch can resolve issues. Delete the existing policy and create a new one, ensuring all settings are correctly configured.
For more information refer to this MS documentation: Configure a default sensitivity label for a SharePoint document library
Hope this helps. Do let us know if you have any further queries!