When my Aussie GD was born (first, and only child, from a donor egg, IVF, mum 42) I was told that I had to have a German Measles jab before I flew over to visit. There was a bit of an epidemic going on at the time. I knew that this was an extreme reaction, but went along with it, just to keep her happy. I understood just how protective they were feeling about their special child.
The Covid epidemic has possibly had the same effect in your situation. They're probably worried about you passing on an infection. At least you are being allowed to visit. Just go with the flow, and accept whatever ground rules the parents are laying down. They will relax as they grow in confidence, and the baby grows older. My DD laughs, now, at how intense she felt when the baby first arrived, but I can understand why she behaved so protectively.
I'm sure that, in a little while, you will get lots of cuddles and be much more involved with your granddaughter. Be patient.