Starting with macOS Sonoma you will see an indicator under the text cursor when you have Caps Lock turned, are using dictation, or have just switch keyboard input types. Here's more about this and how you can turn it off if you really want to.
You can also watch this video at YouTube (but with ads).
Here is the Terminal command:
sudo defaults write /Library/Preferences/FeatureFlags/Domain/UIKit.plist redesigned_text_cursor -dict-add Enabled -bool NO
thank you so much! this worked. I had to keep trying to get it to take the password, but I am finally free of the dread cursor arrow! It was particularly annoying in auto cad.
Another sanity-saving tip. Thank you so much, Gary. So glad to be rid of that caps lock indicator. I use English and Japanese keyboards and having the indicator return to a big box in the centre of the screen is absolutely fine. :)