* Rome may re-propose the scheme for approval at a later date * Treasury wants draft solution for troubled Monte Paschi by July (Adds details, comment from sources, background) ROME, May 20 (Reuters) - Italy has dropped a mooted measure lifting a cap on tax incentives for bank mergers from a decree the cabinet is set to approve on Thursday, according to a draft seen by Reuters. The measure, which had been proposed by the Treasury, had boosted the merger appeal of Banco BPM, Italy’s third-largest bank, fuelling investor bets about a potential takeover by rival UniCredit. Instead, the decree is set to give lenders only slightly more time to approve potential deals.