Has anyone been in the following situation:
Able to write complex code (python and sql) during daliy work deliverable, but when it comes to online practice, assessment test and interviews, you go completely blank as in don't even understand the problem statement

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It all depends on practice. To be honest daily deliverables and interview scenarios are different cases.i can independently work on a fullstack app with minimal assistant but in interview they ask DSA which shorts my brain. But last few months I have been practicing and I am doing well now

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Yes same you will have to practice because they throw tough problems sometimes. Better way is to go through platforms like hackerearth, hackerrank etc n finish easy problems on dsa after learning concepts.

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It totally depend son practice. When u sit in from of your first solution problen u will not even be able to read the input. If you start attending one or two you will notice that most /all of the problems will have same way to read input. Then you move further and try to implement some solutions and run it u will see then only one test pass, at that moment you should spend some time on edge test cases which will be similar for most of the problems. This goes on.
Practice on major algorithmic problems like prime, pair of nos, sum of pairs, string operations etc. You will be able to crack after some time.

Sorry for long post. Thought this will help.

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