The "offline shopping festival" is aimed at driving greater sales for offline merchant partners accepting Paytm, the company said in a statement.
Customers will be offered a variety of deals and cashback of up to 50 per cent on payments made through Paytm, it added.
These 5 million offline merchants include large organised stores, supermarkets, restaurants, pharmacy stores, petrol pumps and milk-booths, among others.
A majority of India's commerce occurs offline in the form of 'in-store' payments across a consumers' trusted network of local and brand stores, Paytm Chief Operating Officer Kiran Vasireddy said.
"True digitisation in India will happen when a large majority of in-store payments move from cash to digital. With our '12/12 festival', we celebrate customers walking into stores where our merchants partners welcome digital payments," Vasireddy added.