If want to invest in a safe debt option for the long term, income funds are a good substitute. These invest in bonds and corporate deposits, thus benefiting from the high interest rates. But the only disadvantage that is observed here is the inability of the investor to gain from higher returns due to the fixed interest rate option.Debt funds do away with the need to renew fixed deposits or search around for the best rate. The fund manager does that for you, thus reducing the interest rate risk. They also offer liquidity because unlike fixed deposits, an investor can get out of a debt fund without any penalty.
The high rates being offered on bank deposits are very attractive. One would think it was the right time to lock in for the long term. But very few banks offer long-term fixed deposits. For most, five years is the longest tenure; some offer terms of up to 7-8 years. The 10-year deposits being currently offered by some banks are rare. Moreover, the rate is usually lower than that offered on 5-7-year deposits.
So, if you are looking forward towards locking your funds for growth a long period of time, it is best to go for a debt fund over a fixed deposit since apart from the non-availability of long maturity periods also due tot he availability of flexible interest rate returns on your investments.