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First we need to have “Retention Policy” enabled and applied to SharePoint and OneDrive from Office 365 Security & Compliance center, otherwise we will not be able to recover deleted files from SharePoint, then the “Preservation Hold Library” will be created after the policy is applied and the first deletion of file happends.
1 Navigate to the SharePoint we want to recover file for
2 Click on “Site Contents” from left hand side
3 Click on “Preservation Hold Library” to open it
4 Now we can see deleted files and recover files from there
Note: Only Site Administrators can access Preservation Hold Library