Banga, 50, will take charge in July, replacing retiring CEO Robert Selander, the company said on Monday.
Banga joined MasterCard in August from Citigroup Inc
Selander will remain as MasterCard's executive vice chairman and retain his seat on the company's board until he retires at the end of the year, the company said. Banga has also joined the board, effective immediately.
Selander, 59, became CEO in March 1997 and oversaw the company's high-profile initial public offering in 2006.
Banga spent 13 years at Citigroup, including a stint as the chairman and CEO of its international global consumer group, with responsibility for the company's brand and marketing work.
When MasterCard hired him last year, he was CEO of Citi Asia Pacific, responsible for all of the company's business lines in the region. He led a major reorganization of Citigroup's Asian operations in 2008 that gave regional heads increased authority across the bank's sprawling product lines.
Banga received about $10 million in compensation in 2008 from Citigroup, making him one of the firm's highest paid executives.
Prior to joining the company in 1996, he worked at Nestle
The terms of Banga's initial contract with MasterCard included the right to leave the company with his upfront compensation intact, including a $4.2 million sign-on bonus, if he was not offered an opportunity by June 30 of this year to succeed Selander as CEO.
Shares of MasterCard, which reports first-quarter earnings on May 4, were up 0.3 percent at $259.55 in light premarket trading. At Friday's close, the stock had gained 1.1 percent since the start of the year.
(Reporting by Elinor Comlay and Maria Aspan; Editing by Lisa Von Ahn)