Do I have to choose any one of e-mail verification or e-mail OTP or both. As I selected both, then I now see e-mail verification is active on new user registration and e-mail OTP is active on admin end.
Email verification and OTP are two different things. If you want your users to verify, you must enable the email verification settings.
On the other hand, OTP is more like a passwordless login. It helps users to log in with a one-time password. OTP doesn't verify a user.