Why does the blog page not take the page template selected?

I have a page template called post-list.php.

This template lists all the posts that I have created with the title, date, author and an excerpt. Now, to list the posts I have created a page called Blog and selected this newly create template(post-list).

Now I head over to the reading setting and select the Posts page as Blog. But it seems to have picked the index.php as the template and not the newly created one.

What am I missing? Any help highly appreciated!