Sharia banking refers to a system of banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia banking is growing at a rapid rate and operating in many countries. In this context it is important to know what are the principles that make Sharia banking system different from conventional banking. It is also needed to study how far these principles are followed in real practice. This paper addresses the above two issues. The objective is to make people’s perception clear about the operation of such banks.