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The original article is on Newsweek which I personally consider a reliable source.
The virginity check, which extended to military fiancées, involves someone placing two fingers into the vagina to determine whether or not they've had intercourse, due to the state of the hymen.
Yes
The invasive virginity test:
Sharyn Graham Davies (2015, 2018) traces the practice to the superstitious masculinity of the totalitarian Suharto regime. The worry was that the appearance of an unchaste woman would put the masculine integrity of the Indonesian state in doubt. Although the regime fell in 1999 and at that time Indonesia legally adopted a commitment to human rights, the military maintains many beliefs from Suharto times. From the 2018 study, explaining normative practices for hiring policewomen in Indonesia:
Recruits must: be between the ages of 17.5 and 22; be unmarried and remain so for at least two years – after two years women can marry and with their husband’s permission continue working; pass psychological tests; have strong religious beliefs; have graduated from high school; not wear glasses; and be prepared for transfer to any region across Indonesia. Further, recruits must be over 165cm tall and have a body in proportion to their height, and they must be pleasing to the eye (enak dilihat), which often means having fair skin (see Saraswati, 2013). Body measurements are taken of recruits, with male officers literally measuring women’s bust sizes (Chanel Bombon, 2014). Recruits must also parade on a cat-walk in front of a male selection committee where their beauty is assessed.
The general consensus among Indonesian activists seems to be that this practice was illegal but the law could not be enforced, as it was practiced by police themselves. Most Indonesians were probably not aware of this practice -- it was an internal police behavior. While America certainly doesn't do this, Americans sometimes are shocked to learn what police learn in training as well.
From the article linked in the question itself, their army chief of staff basically admitted they had hymen "rupture" tests:
Andika Perkasa, the Indonesian army chief of staff, told reporters on Tuesday the controversial practice had ceased.
"Previously we looked at the abdomen, genitalia in detail with the examinations of the pelvis, vagina and cervix. Now, we have done away with these examinations, especially with regards to the hymen, whether it has been ruptured and the extent of the rupture," he said.
So, I suppose the only doubtful aspect is the "two-finger" issue, i.e. how the tests were conducted in practice, as the army commander didn't explicitly admit to that aspect.
The "two-finger test" is/was definitely practiced as such in some countries, e.g. in Pakistan.
"She told me to open my legs and inserted her fingers," Shazia, not her real name, told AFP in a written statement.
"It was very painful. I didn't know why she was doing it. I wish my mother had been with me." [...]
The "two-finger test" endured by Shazia requires a doctor to insert their fingers into the victim's vagina and record whether they "entered easily" or not. [...]
Similar virginity tests are employed in at least 20 countries around the world from Brazil to Zimbabwe, according to the World Health Organization. [...]
Besides the recent flood of articles that just use that term in the context of Indonesia, there's a BBC one from 2015, which has a modicum of detail on the procedure, as was done in the Indonesian army:
Andreas Harsono was one of the HRW researchers who interviewed 11 Indonesian women, who were all military wives and female officers. He said they described two fingers being used to open the vagina while one finger was placed in the anus.
He said that on one occasion, when a woman told others waiting outside an examination room what had been done to her, all 23 applicants left.
He said that most were embarrassed by the procedure, and many were traumatised.
A female military physician told researchers that when she performed the tests in Jakarta, she found it difficult to persuade the women to take part. "It was not [just] a humiliating act... It was a torture. I decided not to do it again," she said.
Somewhat more detailed description found in another 2015 article:
"Indonesian military medical professionals insert a finger into the anus of the woman, widen her vulva with the other hand, and then press the woman's hymen forward so that her whole hymenal ring is visualised," International Rehabilitation Council for Torture Victims secretary general Victor Madrigal-Borloz said in an open letter to delegates.
So one could quibble this isn't exactly "two-finger"... but still invasive in an "original" way. (Hymen visualization as described in Western medicine manuals doesn't involve anal penetration, for a start... it's also not done for virginity determination...)
On the other hand, the Indonesian police seems to have [had] practiced the two-finger test (for their female recruits) in a more literal manner, as per a 2014 account:
“Entering the virginity test examination room was really upsetting,” one woman told Human Rights Watch, a group that has been investigating these requirements. “I feared that after they performed the test I would not be a virgin anymore. They inserted two fingers with gel … it really hurt. My friend even fainted.”
Footnote: there were some comments (deleted because of other tangential matters) that protested that we only know of a handful of examples that were all publicly communicated through some (Western) human rights organizations. (As exemplified in Avery's answer, the Indonesian press also reported on the matter, but their reporting ultimately cited HRW for the details.) However, consider that the Indonesian military initially chose to respond to those reports (around May 2015) simply by defending their testing policy, e.g. as reported in the Jakarta Globe:
Asked for his response to growing international condemnation of the practice, Gen. Moeldoko insisted to reporters at the State Palace in Jakarta on Friday that the so-called two-finger test was one of the requirements for women joining the Indonesian Military, or TNI.
“So what’s the problem? It’s a good thing, so why criticize it?” he said.
He conceded, though, that there was no direct link between a woman being a virgin and her abilities as a member of the armed forces, but insisted that virginity was a gauge of a woman’s morality – one of the three key traits he said a woman must have to serve in the TNI, along with high academic aptitude and physical strength.
The virginity test “is a measure of morality. There’s no other way” to determine a person’s morality, Moeldoko claimed.
His statements came a day after the group Human Rights Watch urged Indonesia to abolish the practice, pointing out that international treaties had described it as degrading and cruel.
(Aside, according to Wikipedia Moeldoko retired from active military service in 2016, and entered politics.)
Likewise, Euronews quoted another top Indonesian general, who at the time [May 2015] had a similar position:
But Major-General Fuad Basya, speaking for the Indonesian military, defended the tests, which he said takes place to ensure the hymen is intact, and to make sure they recruit the “best people both physically and mentally” to the armed forces.
Doctors would know, he said, if the candidates had lost their hymen due to an accident or another reason. She would then be required to explain why her hymen was not intact.
“If it is due to an accident we can still consider it but if it’s due to another reason, well, we cannot accept her,” said Major-General Basya.
I'm not aware at any point at which the military (or anyone else) contested the accuracy of those reports by human rights organizations on the matter.
