When checking the Reset Password in Magento, I can see that there is no validation when using the new password with already used passwords.
Is this the default functionality in Magento or is there any option to restrict this?
Please guide
There is no OOTB Magento mechanism to restrict the usage of previously used passwords.
The only settings regarding the customers passwords can be found here https://docs.magento.com/user-guide/configuration/customers/customer-configuration.html#password-options and are related to setting the password strength, number of requests for resetting the pass, lockout time and some other generic stuff, but no setting regarding previously used passwords.