I have raised this case on Adobe support and they explained issue behind this issue. Solution provided them is also working.
Reason:
The BundleProtectionDomain has been updated since 6.4 and seems to be breaking in 6.5 because of the ProtectionDomain Code Source returning a different value. In 6.4 and below, it returns a jar input type in the CodeSource and location of:
jar:bundle://546.0:0/!/
Whereas in 6.5, although the Protection Domain is set the same (for the most part- [bcprov [583](R 583.0)]) as in 6.4 [bcprov [546](R 546.0)] - the CodeSource value returns the actual jar name and "bundle install method" which is not compliant with java URL: (inputstream:bcprov-jdk15to18-166.jar)
Solution:
1. Place the bouncycastle jar under crx-quickstart\launchpad\ext (you may have to create the directory)
2. Add the following to the sling.properties:
sling.bootdelegation.class.org.bouncycastle.jce.provider.BouncyCastleProvider=org.bouncycastle.*
sling.bootdelegation.class.com.rsa.jsafe.provider.JsafeJCE=com.rsa.*
This solution is working fine for me.