Please visit Karnataka Bank fixed deposits features page. You can see that you can invest in Abhyudaya Cash Certificate which is a re-investment plan where the interest is compounded on a quarterly basis. This may be a good product for you to consider and you can invest for 5 years in this product.

Regarding safety of the deposit, please see this news article in which PM Manmohan Singh has assured investors that their deposits in banks (both public and private sector) are safe and that the banking system in India is sound. The Prime Minister's statement should provide reassurance that fixed deposit money invested in both public and private sectors banks are safe.