Is this teaching Biblical? or is this just a Baptist tradition?
It's based on biblical principles, particularly in the New Testament, but Baptists were among the first to articulate it. John Bunyan was the first to give it full doctrinal development.
Some of the ideas involved are these:
- God has never granted a civil governor authority or power over the souls of his subjects. Even in theocratic Israel, the king's religious duties were carefully restricted, and even the best kings (such as Josiah) could not save their people apart from the people's own repentance.
- Each person stands before God to answer for himself and is saved or lost on the basis of his own status.
- Christianity is a matter of personal faith, which cannot be forced upon anyone.
- Whatever is not from faith is sin, and so to believe and worship contrary to one's conscience is sinful. Thus, it is fruitless for the state to force people to believe and worship differently from their convictions, even if the state's doctrine were correct.
- "Enforced Christianity" looks only on outward appearances, leading inevitably to widespread hypocrisy and the assumption of salvation based on being in a Christian state.
- Since no one's doctrine is permanently perfect, state-enforced doctrine inevitably leads to persecution of those who are in the right.
- The New Testament places correct doctrine and practice in the hands of the church, not the state.
- The New Testament process of church discipline consists of calls to repentance followed by disfellowshipping in hope of restoration, never actual punishment.
If you're curious, I'd encourage you to read the teachings and work of early Baptists such as Bunyan, Isaac Backus, Roger Williams, and John Leland. The SBC's Ethics and Religious Liberty Commission also has a wealth of relevant materials.