To use PAM for SMTP authentication, but with the possibility of passwords in a local file, say /etc/exim4/passwd, overriding those in PAM. In other words, the goal is to have the following:

• Check if the user ID exists, along with a password, in /etc/exim4/passwd
• If so, use the password in /etc/exim4/passwd to authenticate
• If not (or if /etc/exim4/passwd does not exist), use PAM to authenticate.

tls_advertise_hosts = *
auth_advertise_hosts = ${if def:tls_in_cipher {*}{}}

begin authenticators

PLAIN:
   driver = plaintext
   server_prompts = :
   server_condition = "${if pam{$auth2:$auth3}{yes}{no}}"
   server_set_id = $auth2

LOGIN:
   driver = plaintext
   server_prompts = "Username:: : Password::"
   server_condition = "${if pam{$auth1:$auth2}{yes}{no}}"
   server_set_id = $auth1

Contents of /etc/pam.d/exim

/etc/pam.d/exim

auth        required      /lib/security/$ISA/pam_env.so
auth        sufficient    /lib/security/$ISA/pam_unix.so likeauth nullok
auth        required      /lib/security/$ISA/pam_deny.so
account     required      /lib/security/$ISA/pam_unix.so
password    required      /lib/security/$ISA/pam_cracklib.so retry=3 type=
password    sufficient    /lib/security/$ISA/pam_unix.so nullok use_authtok md5shadow
password    required      /lib/security/$ISA/pam_deny.so
session     required      /lib/security/$ISA/pam_limits.so
session     required      /lib/security/$ISA/pam_unix.so

This file must be readable by the exim group (the group your exim daemon runs as) otherwise you will get the error.

535 Incorrect authentication data (set_id='userid')

https://github.com/Exim/exim/wiki/AuthenticatedSmtpUsingPamAndPasswords