The feature can be accessed from Paytm Merchant Dashboard or Paytm for Business app.
The minimum amount that can be transferred is Rs 50, and the maximum amount is Rs 2 lakh in a single transfer request, the company said in a statement.
The merchants can define frequencies and the funds will transfer automatically.
Frequencies can be once a day, twice a day or even three times a day.
"The feature is especially useful in this post lockdown period when businesses are getting ready for the upcoming festive season. Every single day reduced from their working capital cycle is a big relief for them," said Saloni Malhotra, Vice President, Paytm.
In the last five years, Paytm has grown from 40 million transactions per month to 400ï¿½450 million monthly transactions in FY20.
Malhotra said the company will soon introduce merchant-facing APIs (application programming interfaces) for triggering on-demand settlements and checking outstanding payable amounts.
According to RedSeer Consulting, the payment gateway aggregator market in India currently stands at Rs 9.5 trillion and is expected to grow by 2.4 times driven by large value transactions.
It is expected to grow at a CAGR of 19 per cent in the next five years to reach Rs 22.6 trillion by FY25.