To use shadow passwords with PAM, you must first enable shadow passwords. Most distributions have an option to...
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enable this at installations. If you need to enable it later, then you will need to install the shadow package(s), called "shadow-utils" on Red Hat variations and "shadow" on Debian.
Once you've followed the shadow installation process, you need to enable support for shadow passwords in PAM. In a Red Hat distribution, this means adjusting the system-auth file in the /etc/pam.d. The system-auth file contains the default PAM authentication process. This includes the pam_unix.so PAM authentication module. This module is stacked in all contexts: auth, password, account and session. The auth context stack uses the pam_unix.so module and handles authentication like so:
auth sufficient pam_unix.so try_first_pass nullok
It should automatically detect the presence of shadow passwords.
In the password context, the pam_unix.so module is also stacked to handle the changing of user passwords, like so:
password sufficient pam_unix.so nullok try_first_pass use_authtok md5 shadow
The last option on the line, shadow, is used to ensure shadow passwords are created when a password is changed. A good explanation for that can be found here.
Configuration for other distributions, like Debian, is similar and you can find more details on configuring PAM.
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