password file for crypt authentication fails

Goal:
    create a passwd.txt file using pg_passwd and use it with "crypt" authentication to override the pg_shadow password
ofsome users in accessing a specific database 

Method:
    1. add this entry to pg_hba.conf
    host     specific_DB    xxx.xxx.xxx.xxx yyy.yyy.yyy.yyy crypt passwd.txt
    2. connect with remote client as:
    psql -h hostname -U username specific_DB

Result:
    if I try this with auth method "crypt", it fails and when I say fails I mean it uses the default password found in
pg_shadowinstead of the one in passwd.txt 
    But if I use as auth method "password", it works fine i.e. overrides the pg_shadow password and uses the one found
inpasswd.txt 

    The manual says:
    " To restrict the set of users that are allowed to connect to certain databases, list the set of users in a
separatefile (one user name per line) in the same directory that pg_hba.conf is in, and mention the (base) name of the
fileafter the password or crypt keyword, respectively, in pg_hba.conf." 

Any ideas what I'm doing wrong?


TIA,
thalis