@Nimisha Srinivasa Thank you for your patience while I was looking into this issue.
There is no limit for number of encryption scopes in a storage account and no performance implications.
The limit is for number of encryption scopes that can be configured with key auto-rotation- https://video2.skills-academy.com/en-us/azure/storage/blobs/encryption-scope-overview#key-management
A storage account may have up to 10,000 encryption scopes that are protected with customer-managed keys for which the key version is automatically updated. If your storage account already has 10,000 encryption scopes that are protected with customer-managed keys that are being automatically updated, then the key version must be updated manually for any additional encryption scopes that are protected with customer-managed keys.
Hope this helps. Please let us know if you have any further questions and we will be glad to assist you further. Thank you!
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