The "Select Action -> Attachment library/folder" is available in almost all the Maximo applications (e.g. Work Order Tracking, Assets, etc).
When a new custom application is created, the option is not available in "Select action" menu.
Resolving the problem
To make the option available, the following steps needs to be executed:
Go to Application Designer and bring up the custom app;
Click Select Action -> Add/Modify Select Action Menu.
Add the following values: