Custom templates not showing up in template dropdown in WordPress 4.9

In wordpress there is a bug. When you create new custom template and search in backend dropdown you are not able to view custom template name in WordPress. Needs to wait until clears the bug.

Simple solution below

update below code in functions.php

function wp_42573_fix_template_caching( WP_Screen $current_screen ) {
	// Only flush the file cache with each request to post list table, edit post screen, or theme editor.
	if ( ! in_array( $current_screen->base, array( 'post', 'edit', 'theme-editor' ), true ) ) {
		return;
	}
	$theme = wp_get_theme();
	if ( ! $theme ) {
		return;
	}
	$cache_hash = md5( $theme->get_theme_root() . '/' . $theme->get_stylesheet() );
	$label = sanitize_key( 'files_' . $cache_hash . '-' . $theme->get( 'Version' ) );
	$transient_key = substr( $label, 0, 29 ) . md5( $label );
	delete_transient( $transient_key );
}
add_action( 'current_screen', 'wp_42573_fix_template_caching' );

More Info – https://core.trac.wordpress.org/ticket/42573