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I have a requirement to develop SharePoint Mobile app, which involves some external user interaction. The external users do not have the corporate/School account (they have personal Gmail ids, registered with Microsoft). But it looks like, Microsoft do not allow to access the application in SharePoint mobile app with the external accounts. Can somebody suggest if I am missing any settings.? Or is there any other alternate way to fulfill this requirement.?

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You are correct, the SharePoint mobile app does not allow you to login to the app with a Microsoft account. This is clarified by a Microsoft agent in the answer given here:

https://answers.microsoft.com/en-us/msoffice/forum/all/using-the-sharepoint-mobile-app-for-external-users/887ff314-f0d7-4520-8831-7a9dae5fb679

However, users can login to SharePoint Online via a mobile browser using a Microsoft account. Another option would be developing an application yourself that interacts with SharePoint Online via an API (though this would require a fair amount of development).

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It is not feasible to sign in SharePoint mobile app with the external user account, it can only sign in with the Work or School account.

You can also vote for the following UserVoice to submit feedback:

https://sharepoint.uservoice.com/forums/540331-sharepoint-mobile-app-for-android/suggestions/19114744-allow-use-of-the-sharepoint-online-app-for-invited

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