The 26-year-old man, whose name was not revealed, received the fine after he was caught masturbating on a bus in close proximity to a female passenger on Wednesday evening, police said Friday.
When the woman discovered his act and screamed out, he was detained by the bus driver who handed over him to local police.
His act was deemed "disturbing public order," police said.
They said it was the second time he has been caught, which only caused Vietnamese netizens to express outrage that he has been allowed to get away with a paltry fine.
A VnExpress reader named Tuan said such a small fine would not deter similar behavior in the future.
Another reader, Tran Long, said: "VND200,000 is a mild fine that is not enough to deter repeat offenses. I hope the punishment will be changed in the future."
Some people said they are "disappointed" by the punishment, as the act could haunt his target for life.
Just a week ago, a 38-year-old man was also caught masturbating against a high school girl also in a Hanoi bus. He too was handed over to the police, but there has been no information on action taken against him.
Sexual harassment is under-reported in Vietnam and has not been dealt with as a serious issue until recently.
Official data on sexual harassment is not routinely published in Vietnam, though 87 percent of women and girls experienced sexual harassment in public, according to a 2014 survey of 2,000 women by the NGO ActionAid.
Unlike rape, harassment is not a criminal offense in Vietnam, but is often considered an administrative violation under the category "indecent speech and behaviour." Last March, Vietnamese citizens were outraged after a man was fined VND200,000 for forcibly kissing a woman in an elevator in Hanoi apartment.